GST: How Will Malaysia’s Economy Fare In Year 2015?

gstWhat will be Malaysia’s biggest risks or challenges in the following year and beyond?

Malaysia will be taking over the ASEAN chair from Myanmar that help formulate the post 2015 ten year road map for this community from 2016 – 2025 with the theme “Our People, Our Community, Our Vision”. Besides that, 1st April will be Malaysia’s biggest challenge as the coming Goods Services Tax (GST) implementation will be on that day substituting the current Sales and Services Tax (SST).This will bring plenty of opportunities for SMEs besides challenges.

According to our Prime Minister, Datuk Seri Najib Tun Razak during the announcement of Budget 2015, GST is estimated to rake in RM23.3 billion in government revenue.

Bank Negara Malaysia estimated that the inflation rate is expected to rise temporarily in 2015 due to the price adjustments especially the SMEs level and apart from this, is the effect of the subsidy cut of electricity and sugar and the most recent abolishment of fuel subsidy last December which currently is on floating system; make the Malaysia inflation rate increase from current 3% (as of December 2014) to much higher in the coming month.

Which local industries will have the best prospects for 2015, and which will face the most challenges?

The SMEs are expected to bring positive changes in Malaysian economy in the next few years. We strongly believe that those SMEs who prepared themselves such as early familiarisation with the impact of GST, observe the competition and what is the best pricing strategy and the adoption of IT system to enhance their competitiveness will definitely reap the success and fly with excellence.

According to the SME Annual Report 2013/2014, SMEs account for 33 percent of the country’s GDP, 57 percent of employment, and 19 percent of exports. SMEs are an important source of economic growth and will continue playing a vital role in Malaysia’s economic development as we work towards a high income nation status. As compared with our neighbour country, Singapore, SMEs contribute nearly half of national GDP; therefore, we believe SMEs’ contribution still has much room to improve.

Our government has come up with steps to ensure SMEs become the engine of Malaysia’s growth and development, the SME Masterplan recommended six High Impact Programmes (HIPs). This brings new opportunities to SMEs and all practitioners to plan for more investment in new areas. By 2020, SMEs are expected to contribute 42 per cent to the country’s growth.

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Apart from that, our government has also allocated a huge budget for young entrepreneurs to start up new businesses and skills training plus incentives for housewives to encourage them to return to the job market.

With GST coming into effect on 1 April 2015, what will 2015 look like…

For businesses? What will the business community need?
The business community will have to get themselves prepared and familiarise with the GST impact especially to their respective industry. It is not rocket science, but the business owners and/or their accountants who do the accounts have to know this well at least for that specific industry. Failure to do so will be a hefty penalty waiting to be slapped by the enforcement officers of RMC.

With less than three months left before the implementation of GST, the SMEs have to get a GST-compliant accounting software to enable them in preparing the GST computation and subsequently submitting an accurate GST-03 form to the Royal Malaysian Customs (RMC).

It may sound a bit technical, and of course, without a proper guidance from an accountant and other experts, this will pose great risks and challenge for the business owners to come out with accurate GST computations; and the penalties from the RMC are hefty.

Apart from this, there will be a price adjustment exercise that needs to be carried out in order not to be caught under the Anti-Profiteering Act. Businesses should review the price of their goods and services and exclude the elements of Sales Tax and Service Tax. I believe one of the challenges for SMEs is to understand and adopt the best pricing strategy when GST is implemented.

To this end, Cheng & Co provides GST consultancy and advisory for those who seek assistance to their business to solve GST issues.

For the Malaysian public?

I believe the consumers fear the price of products and services will be higher, however this is dependent on various factors which will affect the final retail or sales prices. The government will undertake measures to ensure that the savings by the businesses is passed on to the consumers. The government has also informed both businesses and consumers through various awareness programmes about this, besides Anti-Profiteering Act will be implemented and empowers the Ministry of Domestic Trade, Cooperatives and Consumerism to monitor, control and take action against any businesses guilty of increasing prices unreasonably.

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