Goods and Services Tax - Seamless Integration with
Existing Processes23 Nov 2005
Cheah Chee Keong – Solution Manager, SAP South [email protected]
SAP AG 2002, Title of Presentation, Speaker Name 2
Introduction
Our Prime Minister 2005 Budget Speech extract :
“… The Government proposes to replace both these taxes (Sales Tax and Service Tax) with a single consumption tax, based on the value-added concept. The new tax, known as the Goods and Services Tax (GST), will be more comprehensive, efficient, transparent and effective, thereby enhancing tax compliance ....”
The 2005 Budget
- 10 September 2004
SAP AG 2002, Title of Presentation, Speaker Name 3
GST is charged on the taxable supply of goods and services made by a taxable person in the course or furtherance of business in Malaysia
It is a multi stage tax on domestic consumption, similar to Value Added Tax, levied on taxable supply of goods and services in Malaysia
Imposed on majority of goods and services with minimum exemptions and zero rating
Based on net value at each stage of business transaction up to retail stage
Covers all sectors of the economy Relies on invoiced-based tax It is a tax on consumption and not on investment
An Overview of GST
SAP AG 2002, Title of Presentation, Speaker Name 4
The GST is based on destination principle
Levied at all levels of production and distribution of goods and services supplied and consumed in Malaysia
Made by the taxable person
In the course of furtherance of any business made by the taxable person; and
On the importation of goods or services in Malaysia
Scope of GST
SAP AG 2002, Title of Presentation, Speaker Name 5
How GST Works
The taxable person pays GST or input tax on his business purchases.
He then adds value to those goods and services. When the goods are sold or services are provided, GST or output tax is collected based on the selling price.
At the end of his taxable period, he submits his return declaring the output tax and claiming a credit on the input tax he paid. (Output tax - Input tax)
If tax on input exceeds the tax on output (normally zero rated goods), the difference is refunded
SAP AG 2002, Title of Presentation, Speaker Name 6
How GST Works
Collection of Multi-Stage Tax assuming at 5%
Total GST paid = RM 5.00Consumer
Payment to Retailer= RM105.00
Payment to GovernmentGST collected = RM 0.50Less GST paid = RM --GST payable = RM 0.50
Clay MerchantSales Price = RM10.00GST = RM 0.50Total = RM10.50
Value Addedness5% X (10 -0)= RM 0.50
GST collected = RM 5.00Less GST paid = RM 3.50 GST payable = RM 1.50
RetailerSales Price = RM100.00GST = RM 5.00Total = RM105.00
5% X (100-70)= RM 1.50
GST collected = RM 2.50Less GST paid = RM 0.50 GST payable = RM 2.00
Crockery ManufacturerSales Price = RM50.00GST = RM 2.50Total = RM52.50
5% X (50 – 10)= RM 2.00
GST collected = RM 3.50Less GST paid = RM 2.50 GST payable = RM 1.00
WholesalerSales Price = RM70.00GST = RM 3.50Total = RM73.50
5% X (70 - 50)= RM 1.00
SAP AG 2002, Title of Presentation, Speaker Name 7
Important Notice
This GST Model is an initial proposal from the Tax Review Panel
Any view expressed in the discussion paper is the view of the Panel and does not represent the official view of the Government
The Government reserves the right to change and/or modify any part of this proposal
SAP AG 2002, Title of Presentation, Speaker Name 8
Where will GST impact?
Do you know what are the business processes areas that GST will impact?
Do you know if your System is GST Compliant?
Do you know what it takes to implement GST in your system?
How seamless is the integration with the existing processes?
SAP AG 2002, Title of Presentation, Speaker Name 9
Vendor invoicing and customer billing system in your system
The purchase of goods and services will give rise to GST input tax.
The sale of goods and services will give rise to GST output tax.
Payments and refunds of GST with the Kastam Diraja Malaysia
The supplier of the taxable goods or services is either eligible to refund or liable for payment of GST tax
Reports and forms for routine filing and reporting
Subject to the requirements of the Kastam Diraja, your system will need to provide the relevant reports and forms to support payments and refunds, audits and regular submissions.
Changes in configuration arising from future changes in legislation
Future budget changes may likely to affect is likely to affect vendors, customers, goods (material) and GST rates.
Business Process Areas where GST will Impact
SAP AG 2002, Title of Presentation, Speaker Name 10
Seeking refunds from Kastam DiRaja
Tax reports must be able to match eligible input tax credits against taxable output tax
Bad Debts
GST paid for goods and services sold, but bills cannot be collected.
Tax reports and invoices must support tax paid for customer
Business conducted in FTZs, ICDs, outside country, etc.
Business Process Areas where GST will Impact
SAP AG 2002, Title of Presentation, Speaker Name 11
Where in your system will GST impact?
It will impact all major system areas:
Inventory
Purchase orders, Debit Notes
Sales Orders, Credit Notes
Accounts Receivable, Accounts Payable
General Ledger
Configure the relevant tax procedures, tax codes and tax rates
Configured the relevant account determination for GST postings
GST impact on existing forms
GST impact on existing reports
SAP AG 2002, Title of Presentation, Speaker Name 12
Transitional Issues Actions required NOW
All existing contracts extending beyond 1 January 2007 should be reviewed
The GST implications on all existing contracts should be checked
The GST implications of new contracts entered into from now until 1 January 2007 should be considered
Consider what further actions may be needed as a result of the above, for example, contact a solicitor
SAP AG 2002, Title of Presentation, Speaker Name 13
Impact of not having a GST compliant system
All GST tax input and outputs forms and reports will have to be manually generated
Risk of miscalculation, prone to errors
Strenuous and laborious task if the volume is high
Confidence of your customers and suppliers
More scrutiny from the relevant authorities e.g. IRD, auditors
SAP AG 2002, Title of Presentation, Speaker Name 15
…. Businesses that had the least problems with the GST were those that used a computer package .…
…. Businesses that fared the worst relied on the show box method or a system of their own design ….
…. The most common error relating to input tax credits arose from not having a system in place to correctly record the GST charged by suppliers …..
Excerpts from the article ‘Adjustment to GST keeps accountants on their toes’
Max NewnhamJuly 15, 2002 The Age, Australia
Some thots ….
Thank you
SAP AG 2002, Title of Presentation, Speaker Name 17
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