Local companies qualifying for the new Goods and Services Tax (GST) should be registered now to avoid chaos and possible penalties for non-compliance, cautions Nelson Kwok president of Malaysian Retailer-Chains Association (MRCA).
“Companies shouldn’t wait until the last minute. If they are not ready for GST they could face penalties and cash flow problems. While there are bound to be some challenges in the initial adoption stage, the key is to prepare early so retailers can have a smoother transition and benefit from GST,” Kwok said at a press briefing on GST.
The new GST of 6% will be implemented next April 2015 to replace the current sales and service tax.
“I urge all retail-chain businesses, especially our MRCA members to make haste in understanding and preparing for the GST. The proper processing systems need to be in place so there will be lower chance of errors in their tax declarations and this would reduce compliance costs due to penalties,” Kwok said.
Alex Lim executive director of retail software provider Goldsoft Sdn Bhd also shares Kwok’s concerns. He says that although the operation of GST could seem simple, there is a host of issues that must be considered by retailers.
“This includes tax treatment on consignment stock, product pricing and how to define taxable or non-taxable supplies. Trial period to run the new GST system must start months before the GST deadline to avoid painful and costly surprises,” said Lim.
Lim advises businesses to quickly consult with tax consultants, send their employees to attend GST related courses and choose GST compliant software.
“Training is vital. In fact, the Malaysian Customs Department are holding weekly GST workshops but unfortunately not many people are being informed about these training sessions,” Lim said.
Cost management will also be key as some suppliers may increase prices as a knee-jerk reaction to the new tax.
“Recent price hikes in essential items such as electricity and fuel have already diluted profit margins for retailers. The implementation of GST may place further pressure on retailers in their cost structure, not just in terms of rising price of inventory but also in compliance costs due to not having proper GST compliant systems and processes, “ said Tan Hai Hsin, Managing Director of Retail Group Malaysia.
Tan adds that estimated growth in 2014 for the retail industry is 6% but this could be lower next year as businesses make the transition to GST.