AS the country steels itself for the (GST implementation, awareness has kicked in among accounting professionals for the pressing need to be GST-compliant come April 1 2015. As the regulator and leading professional accountancy body, MIA's agenda is to en sure that practitioner and members are fully prepared before the deadline.
As such, MIA's GST Conference 2014 focused on practical tips, tools and strategies for getting GST right. Regional experts from countries which have already implemented GST shared insights and experiences, but the main message was clear: be prepared; learn everything you can about GST: and Do it Now.
Welcoming more than 200 delegates to the Conference, MIA President Johan Idris said despite the uncertainties that lie ahead, the inevitability of GST implementation presented business opportunities as well. In particular, accountants are well-placed to benefit from the GST game changer, as long as they upskill and prepare.
"Accounting professionals need to keep abreast of all GST-related developments, keep learning and keep upgrading their skills." he urged. "This Conference is timely, as it is important to be able to apply everything you learn here today in the next few months, as GST will be implemented in less than a year." The urgency to "get with the programme" was constantly emphasised and reiterated in all the sessions that followed.
Another necessary component is the tone from the top to support GST compliance and readiness - and this backing must come from all quarters in the public and private sector.
"A lot of people say that the government will not be ready in time," said Subromaniam Tholasy, Director of Customs (GST Division). "This is not true. The government is ready. We have been working on it for a long time. Businesses are not ready. Please bear in mind that it takes between three months and a year to be properly prepared for GST, so start now. You may not be ready otherwise."
He mentioned that the main query was when the Shopper's Guide would be issued, when there should be more concern over how firms could become GST-compliant in the few months left "For instance, tax agents need to be members of a professional body," he pointed out ."They must attend a course organised by the MIA and Customs, to qualify."
The Shopper's Guide, which comes under the purview of the Ministry of Domestic Trade, Cooperatives & Consumerism (Kementerian Perdagangan Dalam Negeri, Koperatif & Kepenggunaan, KPDNKK), will be uploaded by 1 April 2015. Those who wish to apply to be Tax Agents have been able to do so since 7 July 2014.
The GST Act 2014 was gazetted on 19 June 2014. Besides the General Guide, 39 Industry Guides and 16 Specific Guides are already available on the Customs website. He added that besides the extensive legislation that had already been gazetted, 55 software vendors had so far been approved by Customs, so "use technology to help you," he urged. "There are three more orders to be gazetted, but don't wait for this to happen."
Confirming that any company that registers now can obtain a GST registration number the same day, he advised firms to familiarise themselves with the 23 tax codes as not all input taxes were claimable.
"Remember that GST cuts across the organisation; everyone needs to know about it, and at least one or two staff should be deployed to understand how GST affects the business," he said. "GST has implications on prices, so you need to identify if your existing suppliers have registered or if they intend to do so. You will have to negotiate prices and determine if your purchase costs will be impacted. If your suppliers can pass on cost savings to you, you will be able to price strategically and competitively. Remember that the Profiteering Act has been in force since 2011."
Five key areas need to be addressed in order for any firm to be GST-ready; compliance with requirements of the Act, documentation and systems, legislation and transition issues, human capital training, and vendor and customer relations. "You have to ensure that your systems are capable of generating the necessary reports," he cautioned. "It’s about proper documentation. GST can impact on everything, including cash flow, bad debts, human resources, stock management, invoicing, input and output tax, contracts, systems and processes. There will be no more postponements. GST will come into effect on 1 April 2015. Pricing strategy is important. Some companies may actually stand to gain if they get it right"
The current Sales & Service Tax (SST) will not come to a stop when GST is implemented. Instead, he said, "SST will continue for another 18 months after GST starts, but it will be refunded provided the company has registered." However, the number of companies which have registered so far has been disappointing. Authorities are hopeful that at least 120,000 will have registered by September 2014 so that proper training can be conducted. During the first two years of implementation, no charges will be brought for non- compliance, unless it is blatant disregard of the law, he said. “Fines will be lighter but will still have to be paid. Do not take things lightly. Even Singapore, which instituted GST 20 years ago, is still resolving issues.” Sun Life Financial's Head of Tax & Accounting for Asia, Morrie Cheng said that the GST regime in Malaysia had some peculiarities although by design, it was similar to other GST regimes in the region. "However, the rate is low in Malaysia, compared to other countries, he said. "But you need to consider readiness from two perspectives: functional and operational readiness.” Functional readiness included technicalities, consistency, sustainability, documentation and centre of competence while operational readiness covered compliance, reporting and business implications. He emphasised documentation, saying, ‘"When we talk about GST audits, there may be a time lag of three to five years, so documentation is imperative."
Describing GST as "low-hanging fruit," Cheng reiterated that because of its complexity, the tax, when implemented, could create a lot of problems for firms which were unprepared, particularly in the area of auditing. "Documentation provides clarity, and clarity is crucial especially when it comes to auditable evidence," he said. "Implementation plans have to start with the awareness of the need for many GST-related elements, and how all this comes together. You need internal and external education and analysis, together with adjustments to infrastructure, processes and procedures before you make trial runs.
Then you need to review the results, make the necessary adjustments, and implement again. All this needs accurate, ongoing documentation." Because of GST's far-reaching implications and wide impact, it's not just the firm that needs to make adjustments; companies have to educate their staff, suppliers and business partners. "GST really does affect everybody and every department,” said Danny Choong, CFO Sun life Malaysia (Assurance & Takaful).
“Check to ascertain, for instance, if your suppliers have GST certificates - especially if they are charging you GST! Since it affects processes across the board, you have to understand how you run a business with and without GST. For instance, in the life insurance business, life cover has no GST, but personal accident cover within a life policy has GST. How do you account for this? There are costs involved as well, such as reprinting stationery to reflect the new tax." In addition, he said changes in process were also necessary.
SOPs (standard operating procedures) would have to be updated or adjusted to incorporate the new GST requirements. Since GST has far-reaching consequences and implications, he urged companies to use their trade or professional organisations to voice their concerns because "a single loud voice is better than several small voices.” But above everything, even if firms have availed themselves of external advisors and have access to the necessary software and resources, the most important element, he stressed, was to "start early, get the discussion going, and get feedback".
GST PRICING STRATEGY
- PRICING STRATEGIES WILL BE KEY TO OPTIMISING GST IMPLEMENTATiON FOR BUSINESSES.
What happens if your clients don't want to pay GST and are asking you to absorb it? That was one of the thorny issues that Wong Chiun Cheik, CFO of IBM Malaysia has had to deal with.
IBM, he said took it very seriously-seriously enough to set up a team to ensure that its extended sales force understood how to manage the matter as the GST implementation approaches. The IBM Malaysia GST project team is supported by Asia Pacific Tax SME, the WW Tax Center of Excellence, expertise from IBM Singapore, software and consulting technical SMEs, and other external consultants". This wide range of expertise that fortunately is available to us will help develop best practices and the means to identify underscoring the importance of GST.
As part of the strategy to deal with the advent of this far-reaching tax, a steering committee was formed that determined the focal points that would most require attention and identified the impact of GST. "Different kinds of conversations are needed in different areas or levels of the business,’’ explained Wong. "For instance, senior management will have a different perspective of matters, compared to middle management. All systems across the value chain had to be mapped, so that everything would be compliant before the GST implementation deadline. We have met many of our milestones but for a company of IBM’s size, there is still a lot to be done. For example, we have to ask ourselves what the savings points are: that will impact on the decisions we make".
Throughout all this, he said there was still the need to find a competitive edge that could distinguish the firm from its competitors. He added that GST should not be a business cost. "Some goods will actually be cheaper’’ he remarked. "But you have to understand how much control you have over your vendors or suppliers to enable you to manage your pricing. You will need to determine how to evaluate the different vendors and suppliers, in which case you will have to ask questions such as what will happen to GST in contracts which are tax-inclusive.
Also, how will the contract be affected if the GST rate is increased? Right now, it is at an affordable six per cent, which is reasonable considering many other countries have much higher GST. But what happens if this rate increases?" he conceded that even IBM, with its extensive resources and technical abilities, does not have all the answers. Of course, being a giant in the field of technology it can use tech to standardize platforms to determine data integrity and manage compliance and documentation better but this does not mean that all its challenges vis-a vis GST can be resolved.’’What could possibly be the best strategy is to get top-level management buy-in right from the start’’ Wong advised.
"Pick the right team and get as much feedback as possible, from as many parties as possible. It is a complicated situation, but at the end of the day, the industry will adjust itself. What we can do is to have the proper systems in place that will allow us to make adjustments swiftly, in response to the changes of the environment.
SOURCE : MIA ACCOUNTANTS TODAY, SEPT / OCT 2014