Friday 29 Mar 2024
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This article first appeared in The Edge Financial Daily on September 19, 2017

KUALA LUMPUR: The collection of goods and services tax (GST) could exceed the RM42 billion target set for this year, said the Royal Malaysian Customs Department director-general Datuk Seri Subromaniam Tholasy.

The amount of GST collected year to date has already surpassed the sum collected in the same period last year, said Subromaniam, though he declined to provide the exact tally.

“If I give you the figure for the collection as of yesterday, it would not be accurate as GST is collected towards the end of the month. But what I can share based on the previous month is there has been an increase compared [with the same period] last year,” he told reporters at a media conference in conjunction with the Goods and Services Tax Conference 2017 yesterday.

Subromaniam also said some of the aspects of the GST Act 2014, in particular those pertaining to digital service providers, are currently being amended.

“We are in discussion with the tax division of the ministry of finance so that we can amend some provisions in the GST Act, in order to tax the digital economy, in particular the service providers.

“For example, one of the requirements for GST is that service providers need to have a place of supply, or a permanent establishment, in Malaysia. If their place of supply is elsewhere other than Malaysia, it becomes a bit difficult to tax, so we are looking into this,” he said.

He said there are no issues pertaining to goods traded in the digital economy as it still entails the physical movement of goods, which can be tracked to the place of supply. However, the provision of services poses a challenge due to the intangible nature of services.

“This is not an issue affecting Malaysia alone, other countries are also affected,” said Subromaniam.

He estimated that the digital economy could provide up to a few billion ringgit of additional GST revenue to the government.

“[But] to tell you the truth, nobody really knows how big the monster is out there. Once we amend the law and look at the details, we will know. It runs into several billions.

“We will be in consultation with industry players on this, and we hope to be able to [table] the amendment at the next parliamentary seating,” said Subromaniam.

Subromaniam stressed that the amended GST law will have implications in the business-to-consumer (B2C) segment of the digital economy, and not those in the business-to-business segment.

“The digital economy is all about B2C, for example a local software company providing services to consumers pays GST. But a foreign company providing the same services does not, and this creates discrimination. So we need to correct this to ensure that our local players are on [a] level playing field [with their foreign counterparts],” he said.

However, Subromaniam did not give further examples or types of companies that could be impacted by the amendment to the GST law.

Meanwhile, Subromaniam shared that at present, there are 453,000 companies that have registered for GST. Of that, about 100,000 companies are small-scale companies with annual turnover of less than RM500,000, but have registered for GST voluntarily.

“These companies registered so that they can claim input taxes. And also, the bigger companies tend to not want to deal with [smaller companies] that have not registered for GST,” he added.

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