THE goods and services tax (GST) is to be implemented in Malaysia from Jan 1, 2007. In this connection, some wish that the Prime Minister will announce in Budget 2006 that the implementation date will be deferred. Listed companies are concerned that their resources will be over-stretched as they cope with the changes to financial reporting standards at the same time.
My experience with GST implementation for companies, some of which are already IFRS-compliant, reveals that abnormal workload arises and often, conflicting commitments.
Others say that as the oil price increase has fuelled inflation, GST implementation should be deferred to avoid compounding the effect. In this regard, surely, it would be premature to announce today a deferral of the GST operation date.
The underlying notion that GST can contribute to inflation is well recognised but the Government can also act to control price increases as was the case when Australia introduced GST. For example, the Domestic Trade and Consumer Affairs Ministry can work in tandem to control prices.
I would be surprised if there were a deferral of the GST implementation date. Consequently, companies and other firms should prepare for GST.
In Australia, the major corporations began preparing 12 to 18 months before the implementation date came into force. Mid-size and smaller businesses followed six months later. I see a repeat of this phenomenon in Malaysia. Listed companies and financial institutions have begun to prepare for GST. They have sought assistance on when they should begin, where they should start and how they should carry out the project.
Bearing in mind the fact that resources will be scarce, the preparation for GST implementation should begin soon. Based on the recent public consultations and discussions with the Government, GST specialists know the model Malaysia will adopt. Notwithstanding, it would be very helpful if draft legislation, including draft regulations, could be made public as soon as possible. If the GST bill is not tabled in Budget 2006, I hope that it will be released as soon as possible.
GST preparation is complicated, especially for large companies with a multitude of supplies, some of which may be exempt. Companies with limited supplies, perhaps all standard rated, should not underestimate the level of complexity in GST preparation as certain items like gifts, incentive products, fringe benefits and the like have GST impact.
A project team steered by GST specialists is required. Transaction mapping by GST specialists with implementation experience and who are familiar with the implementation process aided by proven methodologies developed overseas should be tapped.
Dialogue with government based on global best practices is required. The assignment of tax codes, provision of practical training to front liners and others, pricing decisions, renegotiation with suppliers, system reconfiguration, process changes and tax planning are all part of a GST implementation project which, like all assignments based on new legislation that are probably fraught with unconsidered issues, will be challenging, especially for the inexperienced.