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GST Health Check – Let the experts handle it for you

The Goods and Services Tax (GST) is a value added tax in Malaysia. GST is levied on most transactions in the production process, but is refunded with exception of Blocked Input Tax, to all parties in the chain of production other than the final consumer. GST, which is also known as VAT or the value added tax in many countries is a multi-stage consumption tax on goods and services. GST is levied on the supply of goods and services at each stages of the supply chain from the supplier up to the retail stage of the distribution.

Even though GST is imposed at each level of the supply chain, the tax element does not become part of the cost of the product because GST paid on the business inputs is claimable. The existing standard rate for GST effective from 1 April 2015 to is 6%. Suppliers, manufacturers, wholesalers and retailers are able to recover GST incurred on inputs. This reduces the cost of doing business in Malaysia, thus enabling fairer prices for consumers. Certain basic goods and services are not subject to GST for socio-economic objectives. These include basic foods, residential accommodation, education, health services, public transportation, and domestic consumption of water supply and electricity up to a certain limit. 

Many businesses are experiencing rapid changes in their business processes without taking sufficient account of the GST implications, which can pose potential risks. GST risks are often transactional and as such, businesses are prone to make repetitive mistakes. If businesses do not take the risks into serious consideration, it may eventually result in penalties being imposed by the Royal Malaysian Customs Department (RMCD). The penalty charges for GST in Malaysia are based on both criminal and civil regimes. The criminal regime states that any person who commits an offense under the Goods and Services Tax Act 2014 shall be liable to a fine not exceeding RM50,000, three years jail or both. In view of this, it is important for businesses to seek the services of experts to conduct a detailed health check on the risks and impact of the GST on their daily operations.

Professionals can help provide guidance and assistance to identify the GST risk areas, and subsequently, your business can prepare remedial measures or undertake further work or review to mitigate the GST risks. By engaging professional services, you will be able to Identify the key risks areas, review and analyse the GST risk areas and discuss with your personnel on those areas that are potentially exposed to GST risk. An expert will also be able to conduct face to face meetings at your site and walk through the draft findings with your personnel. Following this, the expect can summarise their findings and recommendations, highlighting all the GST risk areas.

An expert will also be able to provide a detailed review on selected transactions and also review the selected transactions for each type of supply, purchases and journals, and determine whether the most appropriate GST treatment has been applied. Companies should also understand intimately how GST is applied to their supply chain and adopt the most tax-efficient model. An expert can ensure that GST does not get trapped in the supply chain and becomes a cost to businesses. And finally, it is crucial that a taxpayer adopts the correct tax codes to ensure the correct GST treatment is applied. Taxpayers who have not reviewed the tax coding of their supply chain or have doubts on the tax coding applied should perform a Tax Coding Review to ensure a greater level of comfort. Some businesses are uneasy in selecting tax codes for a transaction. A qualified tax consultant can provide assistance to businesses in selecting the most appropriate GST tax codes for the selected transactions.

Contact us today at info@3ecpa.com.my to get a clearer picture of how to get a head start for GST Health Check!