Thursday, 13 November 2014

GST: 5 Easy Implementation Steps for Businesses


The talk about the new Goods and Services Tax (GST) system has been going around town recently. Plenty of questions were raised by manufacturers and traders as whether cost of goods and services will rise, what goods and services are taxable, when must the taxes be remitted to the Government, how do I to get myself ready, etc.

GST which is a broad based consumption tax covering all sectors of the economy, is levied on the supply of goods and services at each stage of the supply chain from the supplier up to the retail stage of the distribution. It will be implemented on 1st April 2015 and the rate has been set at 6%. This new taxes replaces the current Sales and Services Tax.

There is a common perception that businesses will suffer a higher cost of goods when GST is implemented. However, this is not so if one understands and comprehend the mechanism of GST.

Before we, proceed to the topic of discussion, let us have a brief understanding how GST or Value Added Tax (VAT) in some countries, mechanism works. As discussed earlier, GST is a consumption tax, where a person who consumes the goods or services will be subjected to this tax. Cost will not escalate for intermediaries such the manufacturers, wholesellers and retailer as they are eligible for GST input tax claim from the Royal Malaysian Customs for the GST charged by their supplier of taxable goods and services.

This process GST input tax claim will be repeated in every stage of the supply chain. The process of input tax claim will cease when the person who consumes or uses the goods and services is NOT a taxable person for example a diner dining with his family in a restaurant. He has to bear the GST charged by the restaurant. GST is imposed on supplies of taxable goods or services by a taxable person made in Malaysia in the course or furtherance of any business; and importation of goods.

We are just 6 months away to the implementation on 1 April 2015. Here are 5 easy implementation steps that a business can undertake in this couple of months.

Appointment of implementation team leader and team members

Gather your GST Implementation Committee. The committee will consist of heads of departments from Human Resources, Information Technology, Management Accounting / Costing, Purchasing, Sales and Legal led by the finance department team.

Department Checklist

Finance Department
  • Registration - head office, group, branch, schemes
  • Upgrading accounting software - updating of GST information and tax code
  • Cash flow planning
  • Designing of Tax Invoice / Simplified Tax Invoice
  • Return submission planning
  • Determine type of goods and services eligible for input tax credit
  • Transitional provisions
  • Inventory count on 31 March 2015 with the presence of an external auditor or accountant for the purpose of sales tax refund.
Human Resources
  • Review of employees’ benefits which attract GST
Information Technology
  • IT readiness - upgrading of IT system and accounting software
  • Application of e-Voucher of RM1,000 for purchase or upgrading of GST approved accounting software
Management Accounting / Costing, Purchasing, Sales
  • Pricing strategy
  • Review of contracts and agreement
All departments
  • Identifying GST critical and risk areas
  • Determine rate of tax of goods and services
  • Draw up time line and critical path

Appointment of external GST Consultants

Consult an approved GST agent whenever you are in doubt or, alternatively, approach the RMC’s GST Unit of your state or RMC’s head office at Putrajaya. Visit RMC’s website for contact details

IT readiness

Evaluate and decide a GST compliant software which suits the business. Other factors to consider are:

  • Stability of the software
  • Pricing of the software
  • Training
  • After sales support and cost of upgrades
  • Expandability

Implementation and trial run

Conduct a trial run with mock transactions after the software is fully implemented.  Check and confirm there are no posting errors and accuracy of the GST return forms.

Post implementation and compliance review

Monitor your transactions during the first taxable period and review your first return before submission. Ensure that the summary of all required information in the return form were properly extracted and disclosed.

Businesses with an annual turnover or expected to achieve an annual turnover of more than RM500,000 are required to register themselves by 31 December 2014.

Please visit to download Step-by-Step Online Registration Guide.

Staff awareness, training and seminar
Although the above suggested implementation steps sounds simple and easy, the whole the whole process may be a daunting task if the members of the Committee are uncertain of the mechanism and do not have a basic understanding of this new tax. Therefore, the ensure smooth implementation, it is essential for companies to send their staff for GST familiarisation programmes organised by the RMC or various bodies or organisation. The committee must understand the guidelines and public rulings published on RMC website

Contact us at for further information.