PETALING JAYA: Small and medium enterprises are in favour of the return of the goods and services tax (GST) but they want the rate to be lowered to 4% from 6% previously.
Small and Medium Enterprises Association Malaysia (Samenta) chairman William Ng said the consumption tax was a fairer and broader tax regime that avoids a cascading tax effect while allowing output tax to be set off against input tax.
“However, once reintroduced, we hope there will be no further ‘flip-flop’ as that only incurs additional costs which businesses cannot afford at this juncture,” he told FMT Business.
“Also, the full range of products and services that are exempt or zero-rated should be made known prior to its reintroduction.”
Ng said SMEs had to invest quite substantially in manpower, professional fees and information technology when the tax was first introduced in 2015.
However, since it was scrapped in 2018, these investments had gone to waste and most businesses had to retrain their staff.
“Another chief complaint is the delay in GST refunds. Some SMEs have been made to wait for as long as 18 months for theirs,” he said.
He said SMEs were not interested in profiteering from any change in the tax regime, but frequent changes would result in substantial compliance cost, part of which would have to be passed on to consumers.
In 2016 and 2017, consumption tax brought in an average revenue of RM42.7 billion per year, accounting for nearly 20% of the country’s total tax revenue. In contrast, the sales and services tax (SST) regime contributed RM27. 9 billion in 2021.
On the ground, Terang Bulan Landscape Sdn Bhd founder Tan Peng Koon, who started his business in 2017, recalled that complying with GST was a hassle as his business was fairly new and had no account executive on the payroll.
However, five years later, Tan is ready for its return as the company now has an accounts executive to handle the matter.
“Administrative concerns aside, I hope the government can guarantee prompt reimbursement of GST refunds,” he said. “For a small business like mine, delayed reimbursements will result in severe cash flow problems.”
Thenesh Kannaa of tax advisers TraTax called for a proper study of the timing of the reintroduction of GST to manage its impact on the economy and the people.
He also called for the tax authority to be empowered to process refunds so that only the net collection after refunds is allocated to the Federal Consolidated Fund.
Enough time must be given for businesses to prepare for the reintroduction of the GST, Thenesh said.
He also joined others in highlighting the need to consider the applicable GST tax rate along with the extent of its exemptions.
“For example, a low rate of tax without any exemption could be more damaging to the low-income group than a higher rate with carefully decided exemptions,” he said.
“It would be misleading to consider the tax rate in isolation without regard to exemptions and other targeted initiatives to offset the GST’s impact.”
Last month, Prime Minister Ismail Sabri Yaakob said the government had not ruled out the possibility of reinstating the consumption tax as an effective way to increase national income and help combat inflation and the rise in the cost of living.
Finance minister Tengku Zafrul Aziz revealed it would take nine months to reimpose the tax after getting approval from parliament.
Source: https://www.freemalaysiatoday.com/category/highlight/2022/07/13/smes-express-support-for-return-of-gst-but-seek-lower-rate/