This article first appeared in The Edge Malaysia Weekly, on October 26 - November 1, 2015.
Revenue from the Goods and Services Tax (GST), which was implemented last April, is projected to increase to RM39 billion in 2016, from RM27 billion this year.
The RM39 billion collection will constitute 3.1% of Malaysia’s gross domestic product (GDP), according to the Economic Report 2015/16.
This would offset the contraction in the government’s oil-related revenue, thus increasing the share of non-oil revenue to 85.9%, from 80.3% in 2015.
The government has also made some changes to the GST structure, and these include:
• relief on supply of goods made between and within free zone areas;
• transactions between land owner and developer in joint ventures in property development are not treated as supply;
• increase in zero-rated medicines from 2,900 to 4,215 items and medical equipment to 128 items; and
• zero rate the supply of e-books and e-journals.
Since its implementation on April 1, the government has seen an uptick in the total number of businesses registered under the GST. As at September 2015, the number was 390,378, compared with 300,811 that registered under the mandatory period which ended on Dec 31, 2014.
While the government notes that more than 90% of GST registrants submitted their monthly and quarterly input tax claim returns within the stipulated period, 99% of which were submitted electronically, the refund process for electronic submission took more than the 14 working days due to several factors. These include:
• claims made in the wrong taxable period;
• entries were incorrect, incomplete or supplies declared in the wrong boxes;
• companies could not be contacted after seven days from the date of issuance of the notice of verification and request for information;
• slow or no response received from applicants to queries by GST refund officers;
• false or doubtful claims that required further review by GST refund officers;
• incorrect or incomplete banking information of the companies; and
• multiple companies under a group registration submitting banking information of the companies.
The government notes that the number of complaints on the GST system has reduced dramatically from 4,564 in April 2015 to 147 in August 2015.
Challenges on GST implementation are improper issuance of tax invoices, confusion between service charge and service tax as well as increase in prices.
Some businesses, the report says, were not well prepared to issue proper tax invoices due to failure in procuring and installing GST-compliant software and hardware on time. They were allowed to use handwritten tax invoices until the end of September 2015, until they had the necessary tools.
Given that profiteering was a concern, measures were taken to protect consumers. These include the enforcement of the Price Control and Anti-Profiteering Act 2011 and the “Ops Catut” programme, which involves inspection of business premises as well as action against errant traders.
The government continues to facilitate the registration process to encourage more businesses to register, which includes enhancing the MyGST portal for registration with simplified features, holding special sessions on the registration process in all GST training programmes and extensive promotion through mainstream and social media.