Set the GST threshold at RM 1 million instead

The compulsory manual GST registration for business entities with annual transactions above RM 500,000 is unnecessarily draconian, troublesome and inefficient.

I would like to propose that the threshold be set at RM 1 million instead and with the Registrar of Companies (Suruhanjaya Syarikat Malaysia) playing a role in creating a near-automatic registration process.

With less than three months to go before the implementation of GST, Malaysian Customs Director-General Datuk Seri Khazali Ahmad warned errant business owners who refuse to register for GST that they will be subject to compulsory registration with a penalty.

Khazali said that according to Section 21(2) of the Goods and Services Tax Act 2014, businesses that fail to register for GST would be issued a notice to register within 14 days or face the penalty and automatic registration.

All businesses with daily transaction exceeding RM1,600 are required by law to register for GST implementation, he added.

As the mandatory registration period has ended on 31 December 2014, owners who register this year will be subject to fines. The quantum of fines will be higher as the implementation deadline approaches.

“It ranges from RM100 per day for those who register from 1 to 20 January, RM150 per day for those who register from 21 January to 9 February, and so on,” Khazali told the media.

Prime Minister and Finance Minister Datuk Seri Najib Razak should ask Khazali to retract his statement and to instruct the Customs not to enforce such punitive measures but take an educational approach towards the implementation of GST.

Although the government has spent at least RM17 million (as of a March 2014 Parliament reply from Ministry of Finance) on pro-GST publicity and propaganda, how much of this information on the mechanics of how, where, and when to register has been made available to the small business owners, particularly in rural areas and those with little or no access to media channels?

Many small businesses will now have to pay exorbitant fines due to the hasty implementation by the government without sufficient time for the registration, briefing and preparedness adjustments to take place.

Typically it takes at least several months for businesses to register, get their staff trained, change software processes to comply with GST requirements, change all financing documents to tax invoices, convert tax accounts from yearly reporting to quarterly reporting, reconfigure pricing due to supply chain affecting profit margin, and the numerous other minute details that come along with GST implementation.

Many consultants and accounting or tax firms are charging thousands of ringgit to train business owners for GST. Not to mention the price of software upgrading and changing paperwork, retraining employees – all this done to collect tax on behalf of the government. It is a hefty sum that many small businesses – within the RM500,000 transaction threshold – can ill afford.

Without ample time for the businesses to prepare themselves logistically, it is unfair of the government to penalise the business owners without offering guidance and practical solutions.

The implementation of GST is going to hurt the economy in a massive way as it depletes the disposable income of ordinary Malaysians hence causing a halt in domestic demand.

I would argue that the implementation of GST hurts small traders and businesses, as the RM500,000 annual transaction threshold is just way too low. Any business with a transaction of RM 1,600 per day will have to register as a GST collector.

It should be clear that transactions do not necessarily translate into income. Many businesses may have a sizable number of transactions but it doesn’t mean they make a huge profit out of it.

Many small businesses face serious challenges as the implementation of GST would increase their administration cost in a massive way, putting many out of business.

Najib should listen to the people to deal with the adverse impact of the implementation of GST.

Liew Chin Tong