GST amendments can cause problems for biz

KUCHING: Latest amendments under the Goods and Services Tax (GST) on imported services and the introduction of late payment penalty has been viewed by Ernst and Young (EY) as moves that can give problems to businesses.

According to executive director Koh Siok Kiat, starting next year, late payment penalty will be imposed which starts from five per cent for the first 30 days, with an additional 10 per cent for the next 30 days and another 10 per cent for the third 30 days which totals up to a maximum of 25 per cent.

If they still fail to make payment together with the penalty, then only will the Customs initiate action to prosecute them.

“To me, that (move) is a bit harsh considering GST is still new to the business community,” he told The Borneo Post on the sidelines of the EY 2016 Budget and Tax Conference held here yesterday. “I think the promise earlier is businesses will be given two years to probably get used to the system and Customs will conduct advisory audit the first two years.

“If they know cases of fraud or intention to cheat, they will not be punished – they merely recover the tax invoice.

“But, with the introduction of this late payment penalty, it looks like they must impose the 25 per cent and that becomes the ‘punishment’ to those business who are not familiar with the compliance and may inadvertantly make some mistakes,” he opined.

Koh believed that the authority must consider that when the business is making late payment, it is probably unintentional.

He further opined that the authority must consider a certain kind of appeal for a waiver, saying that, “The Customs authority must consider case by case to allow full waiver on the late payment penalty for genuine cases otherwise, it’s very harsh.”

Another GST amendment which brings cause for concern is the GST treatment for imported services. Right now, businesses utilise the reverse charge mechanism when they make the payments overseas.

The amendment which takes effect from January 1, 2016, changes the time in that the earlier you need to report the GST liability, is the earlier of the tax invoice which is basically the invoice you receive from the foreigner or the payment you make to the foreigner.

“This can give rise to problems to the business because when they receive the invoice, they may take some time to post it into their accounts payable (AP).

“If they post it in the AP in a different month, it will result in their reporting in the wrong taxable return,” Koh said, adding that it could then be some kind of penalty if you do not report in the correct taxable period.

Another area of change that Koh touched on is the flat rate scheme which he noted they they have lowered the threshold from RM100,000 to RM50,000. These small businesses can use this money to defray the input GST which they incurred on their purchase and cannot claim.

“This extra two per cent will help them to offset the higher cost,” he said, adding an example that for RM50,000, these businesses get an extra RM1,000 a year, it will be good because this small amount is considered a lot to them and thus, is beneficial.

“I believe this is beneficial. It’s a good move,” he added.

On to the zero rating which has been extended to prescription drugs, Koh believed that it is a very good development because with individuals who are ill, this move will help them save money and lighten their burden.

“But then, looking at the broader view, they might as well extend the zerio rating for all medicines, not only the prescription drugs because anyone who falls sick needs to take medicine and definitely you don’t want to burden them with the additional six per cent.

“You might as well zero rate all medicine instead of just the prescription drugs. That’s what I think they can do,” he said.

As for the GST refund, Koh noted that the Customs authority is improving, saying that in April the GST refund within 14 days, their achievement was only 20 per cent but in August, they were able to refund around 60 per cent of the GST registered persons within 14 days.

He acknowleged that they are improving and supposed that it can get better as time goes on eventhough not for all but they are improving.

“Of course, the ideal is 100 per cent for all GST refund within 14 days. That’s what they promise. But, they do say that they are trying to simplify the verification procedure.

“They are trying to make it easier and make it faster. So, I think they are improving,” he said.

He also cautioned businesses to be mindful as the Customs is going to conduct full audit starting this month because it has six months since the implementation of GST.

It is thus necessary for businesses to keep relevant and necessary documents and also records so that when Customs conduct a full audit, they are more prepared and not get into unnecessary non-compliance issues with the Customs.