1. Malaysian Business Page 1 of 2
01-Nov-2009
Page: 42
General News
By: Peter Devlin
Region: Malaysia
Circulation: 25000
Type: Malaysia - English Magazines
Size: 1407.37 sq.cms
Frequency: Fortnightly
r. min mr. P.-. F, rwCkU
Getting GST-
Ready
Are Malaysian businesses ready for a Goods and Services Tax?
THE GOODS AND SERVICES input tax restriction: rtslrrr that in roast instances, the GST
Tax (CGST) which was first announced Ott! of scope - Pet subject to UST should not lie a cost to business, unlike
by the GGowernincnt of Malaysia in liability for GST uii slandaaci-raLCel the current Service Tax and Sales Tax.
2064 to be implemented in b la]a}via taxahlksrtpplies rests with the supplier; GST should in slid east~s, ultimately
urr Jan r, 2007. is irow in the filial therefore suppliers neeei to ensure; he borne by the end eumNunier,
stage of implementation stud, by the that they collect the (;S3' from their The exeeplien to the above is the
CoveNinlefl1. customers. Registered busioessees exempt supplies. These are exp acd
The GST addresses the need for providing standard-rated supplies Lu include' certain sC:1'vieeti pro ided
[lie Government to ensure increased (subject to GST) or zero-rated suppi[CS by financial institutiuns, residential
revenue flows in the coming years (e.g, exports - suhjcct to the tat butatu%) property devrkipois, educational and
by expanding the tax hMe. Upon are entitl.&I to ol1 e.t their GST- l iabi] ire (if health cart or};anisittions. No t1S'1' is
irnplementaliun ofthe GST, the existing any) on supplies made by the GST paid charged on most supplies provided by
Service Tax and Sales Tax in Malaysia on inputs (input tax). This is known as these [altl lies, but there is no entitlement
will be abolished. the input LPLX Credit (ITC). This should to an input tax credit t'orCST incurred
The GST Ail I operate similarly to that
in other countries v,th :i {;Y- or 4'.4'f
(ValuuAdded Tax) svstetn, There will be
crates - a zero-rat{. which wilt apply
to must goods and ser'iu .ti exhorted
frrapi ,Malaysia, and a standard rate, }'er
tobeannouticed, bul expected to be less
011111 5%- In Comparison, the {;S'T' rates
of the tlosost ueiglibouririt} euunlrics
are 7% in Singapore and Thailand and GST rates
io% in Endonesin. o Sales tax
'l`hc UST will .'apply on t1TC'supply' of
most goods and services consumed in
Malaysia, There will be fourcategr,rir
of supplies for GST' purposes.
I St x ndard-rated (tax able) - subject to
the CGST at the relevant rate
I Zero-rated(alsotaxable)-subjecttry SG TH IN MY
Ilie ar r)
c'fl.kx.BM+psL r I ---nswpwr.an-,.,rr,csr. srk anus,surer i,ncMrasa,rt.:Hum a- i , n a y W5n!JA lµslka%utl Pr RFP I fn
I Exempt - nut suhiecL lu GSTI+utwith .T ma GST Ir itCl- IS riT Ea Irf n-H r tl, LI5' -]
Ref: 59811631

2. Malaysian Business Page 2 of 2
01-Nov-2009
Page: 42
General News
By: Peter Devlin
Region: Malaysia
Circulation: 25000
Type: Malaysia - English Magazines
Size: 1407.37 sq.cms
Frequency: Fortnightly
Other, In Lltis inutance. input GST wilt advisers. This may include looking at
be a cost era these; lTL]S111a'.sties tltat will how the Coinpany'S fotrign ope.rat[oils
CURRENTLY THE SALES
either be absorbed or passed onto the operate under an existing GST or V'-kT
customer. In other c i n tries opcnd t i ii g TAX ON THAT NEW VEHICLE framework.
CST type systems, certain cwnteswions IS 10%. ONDER THE GST When the Glnvernnlent of Malaysia
or limited rxrliefs are provided to 1h . PROPOSED FOR MALAYSIA, announced the deferrne.ut of the CAST
eKCT1113t s etors to provide partial ITC- THE GIST CHARGED WILL in }'ehruorv 2c?ik6, the reason was
type credits to offset the input GS'f BE LESS THAN 5%. to allow Malavsiait businesses ]note
costs to [11e fsnpplierc of such Sur 'iies. time to prepare and get ready for the
It is unklkowu whether such similar changes the GST would bring. But
partial ITC credits will he. available various industry sectors as part of the how many Malaysian businesses have
10 tlnr. ciipplim {]f exempt services in GovernErle nt's overall study of the Sciciad take.kt the opportunity provided by
Mahvsi a. iFn pact of the GST. the Government to do so? Many have
All of these wsill riot ncee tilriiv result The Malaysian (;S'1 system is likely indicated that they w6[l lint begin anyr
ill F1,a[;ty'siryrl uousUmers automatically' to he :] pioneer in how the UST will CST preparations until such time
pu}'in higher prig when [1L1kTllaci[1F; impact lslarnic frnanci-0[ services. when the. (Yove.rnnient has announced
ewe.rvday go ids and s rvit'ex- The Other jtkriadie'tjOLlti with dvitanrie a start-date,
Malaysian GST system as proposed Islamic financial arrangements are ! 1 alavaian businesses must do their
will extend the ' e.rrrratiitg t .tegory to al,wo planning for ltax reforms which part to ensurv the-v are adequately
itic'lttde eecrtain other goods used by i110wic the ILitlruduction of GST or VT prepared for the introduction
all consumers and Can-Md4.rud basic systems- The United Arab H.mirates of the UST and the impact it will
nec!eSsities. ikl[1LLdin ; I7r,sic groceries. In (U_li) rind iTii otl]ur lis't' 111MELbers Of have on their business operations,
addilion, certain services Ihat are 'itdl to the Gulf Ccioperatinn Council (GCC} en tnmcrc and ski.pplicrs. The time
both the health wid development of a] I have deferred the introduetioil of and resources required for a CST
dal lvaiiii will be exempted from the lIST ltttt work has been done on implementation programme need to
CYST-'lhiswi]lirxhkdehealth ar{. Ei-w s drafting legislation, Pakistan is ahso be adequately planned for. especially
provided by the Govern]neut, university currently in tl]e early stages of drafting in the fight of other competing
and private hospitals and climes, a corn prehensive VAT legislation- .1 business transformation projects
Mass donwstic public Iransprirt.ati trn Malkysia!] GST law which adequately that might he ongoing- The type of
services such as rail {K'I'M, LRT. ER 1, and fairly addresses they impact of the CST itnplCllLUI]Lation programme
and Monorail), s]]ips, boats, ferries, GS r on Ts}amic financial services is required depends on the complexity
express Inks, stage bus, workers hug, likely' to became a useful reference tool of the hlksinews itself, its local and
school bus, Feeder how al id taxi swrvices For these and other 'i}kmirje.s as they foreign operations and group structure.
will also l)c CxCml)ted, draft LILUir own CST rules. Certainv every business needs to
The Government has also iildieated A.s w]th any Legislative or regv[ntnrv look at income and expenses to
that ih,e (L81' will nut apply to the refc,rni, cr] ttriltg ewmpliailce with the determine the (;4'I' impact; along
-',u ppLy of residential real estate. This new rules will lie a challenge for the with a review of Current IT systems
means that the tiale, ret]tal or [east of a authol-iti[es. (.I a way Lu acconll)]ish this to assess compatibility With G'['
rcriidential home would not attract the wuLLli be for the Ministry of Finance regttirenients, as well as ensuring
GST as ski ch rvio:s will be considered and the Royal Malaysian Customs Lo documentation wiIi be compliant v.'ith
cxcriipt from the CST. imtkpheme'nt a coordinated approach the {;ST legislation.
While examining the GST impact to ensure that all M8llaysiails and When the Government dues announce
on roost 1 w l:ll:iysian consumers, it has Malaysian businesses are adequately a GST start-date, all Malaysian
been found that in certain industries. informed of the impending UST and businesses will need to actively engage
UST should have a l ertelicial impact their rt,_gpo rsil.,iIities, in a GST implementation programme,
to the k'ntlsuiller. Take for example a Will Malaysian businesses he ready or re-start the UST implementation
new vehicle purchased in MaLlavsia. for a 0S1'that inigllt N--gin in the second programme they had in place in
C'nrrentlv the Sales Tax on that new half of 2011? Eighteen months should .t0O4/2005, 02
white is to' . Lender the L i 4' l- [}roposud be a sufficient tinge-frame for even
for Malaysia, he UST e'harged will he large businesses to be prepared. For the
less tllall 5'%. This should re.sitlt in a largest Malaysian businesses, naane.]y. Peter Devlin is Sen<or Manager-ST wit r Errrt S
Young Tax Consultants San- Bhd. Toe iniarrna'ion
direct cost savings to the consumer. thoseopcratitlg on a wider global-scale, cnnlained is .his article :s in!eM1des ft.' genpsal
irnilar (j ST cost analyses have hee.i the expectations are that they would gu!dance Dory. It is got i{tendead to be a substitute
for detailed research or the exercise of professional
conducted by the 4invertai5L,'nI lur u have already drolly siinie type of GST Iudgmo!nt. 0? any specific matter, reference should
variety- of gont1} ii Ilki services across prfil}a!'al i 0116 thur in-house or using tax be mada to the aopraprietc adstxor.
Ref: 59811631