SMEs told to prepare for goods and services tax to avoid additional cost

Published: Monday February 3, 2014 MYT 12:00:00 AM 

Updated: Monday February 3, 2014 MYT 7:51:29 AM

BY LIM WING HOOI

A man working at a batik factory in Kota Baru, Kelantan.
SMEs should prepare themseleves for the incoming GST so
that they will not incur additional cost of doing business. File pic by
ONG SOON HIN/THE STAR

PETALING JAYA: Small and medium-sized enterprises (SMEs) need to be prepared for the goods and services tax (GST) so as to not incur additional cost of doing business.

KPMG Tax Services Sdn Bhd executive director Soh Lian Seng said the multi-stage tax on domestic consumption allowed a rebate for GST-registered businesses via an input tax credit on the GST incurred on inputs purchased for the purpose of making taxable supplies.

“This credit mechanism means that the GST is levied on the value added at each stage of production, and it can be cost-neutral to a business, with the burden falling on the final consumer who has to bear the GST,” he told StarBiz.

A business is only required to be registered for the GST if it makes taxable supplies when the annual taxable turnover exceeds RM500,000.

However, those with an annual taxable turnover of less than RM500,000 are exempted from being GST-registered. They could, however, register on a voluntary basis.

“As only a registered business is allowed to claim input tax credit, post-GST, businesses not registered may end up being less competitive because they would not be able to claim any input taxes on the raw materials, utilities, etc, which is used to manufacture their products,” he said.

This could lead to them pricing in the input tax as part of the cost, increasing the price of their intermediate goods, which would be borne by their customers.

For SMEs that would be claiming the input tax credit, Soh said the tax invoice was crucial during the procurement stage. There could be added operational cost during the transition period as well.

“SMEs would need to be prepared with IT systems that are able to capture the GST when a transaction occurs. They would also need to allocate resources for staff training,” he said.

Some measures have been proposed to support the smooth implementation GST and these include the income tax rate for SMEs on the first RM500,000 of the chargeable income to be reduced by 1% (from 20% to 19%), effective from year of assessment 2016.

There is also a proposal for double deduction on expenses incurred on the training of employees in the area of accounting and information and communication technology for GST purposes for year assessments 2014 and 2015.