On the 16th of May 2018, the Ministry of Finance Malaysia (Mr. Lim Guan Eng) has announced that the Goods and Services Tax (GST) will be set to zero percent starting from 1st June 2018. GST to be replaced by Sales and Services Tax (SST) starting from 1st September 2018.
From 16th May 2018 to 1st June 2018, there's only approximately 2 weeks of transitioning period to allow all related departments and personnel to change the GST rate. This caused many confusion among the nation as many details has yet to be announced that time.
Well, the fact is, the mere number changes in this announcement is just the tip of the iceberg. There are countless of minute details that must be adjusted to achive "zerorization" of GST rate. This is because there are many types of tax code under the GST 6% rate to fit different types of items and nature of businesses. Some goods and services were deemed to be zero-rated or exempted before this as well. Will the tax codes for various item still be the same? If the items' tax codes are not the same anymore, where will these tax codes be mapped to? Does it mean that business owners no longer need to submit GST-03 (tax return) forms after 31st May 2018? How should one submit GST-03 after 1st June 2018 if he/she needs to? How will accounting softwares fit to the GST rate change? Lots and lots of questions will pop-up if you are a business owner, manager and accountants.
This blog post hopes to help clear some confusions.
What happens when GST rate changes from 6% to 0%?
Some people mistaken that GST is dismissed altogether and that they do not have to follow the GST rules and regulations in business operation starting from 1st June 2018. This is a huge misconception about the GST rate changes.
While the changes means consumers does not have to pay GST after 1st June 2018, GST itself is not yet abolished. It is merely a change on the GST tax rate, everything about GST is still running. Business owners who are registered under GST will still need to remain compliance to the rules and regulation of GST. They still have to issue tax invoice, submit GST-03 to claim tax return and other tax reporting are still required as usual until abolishment of GST is announced by the government.
The change of tax rate means goods and services prices should reduce by 6%. This applies to all transactions that were previously subjected to GST rate of 6%, not only for over-the-counter transactions. For example, interbank giro charges will be reduced from RM1.06 to RM1.00 starting from 1st June 2018. Cost to eat out in restaurant that charged GST 6% will be reduced by 6% too.
Nevertheless, this change of rates does not apply to goods and services provided before 1st June 2018 and they will still be subjected to the GST rate of 6% even if the payment is made after 1st June 2018.
Deposits paid before 1st June 2018 which includes the 6% tax, whilst the goods or services are only provided after 1st June 2018, will still be subjected to GST rate of 6%. Payment after 1st June 2018 will then be subjected to the 0% tax rate.
What should I do when declaring GST after 31st of May 2018?
As mentioned earlier, GST registered company will still need to remain compliance with GST rules and regulations. These companies will still need to submit GST payment and GST-03 return.
If the tax rate change is between your taxable period, e.g. from 1st April 2018 to 30th June 2018, you will need to declare GST at the rate of 6% before 1st June 2018 in column 5 (b) of GST-03 and declare GST at the rate of 0% from 1st June 2018 in column 5 (a).
When declaring supplies that was formerly zero-rated, business owners need to declare them in column 5 (a) of GST-03 as GST (Zero-Rated) Order 2014 is revoked.
If you have received your goods before 1st June 2018 and some payment is made, but only be able to sell it after 1st of June 2018, You will then need to use the tax fraction (6/106) to determine the amount of tax to be accounted for.
*Note: Late payment of GST after 31st May 2018 are still liable for penalty.
How does TreezSoft adjust to fit to this change?
TreezSoft has a team of dedicated IT and support professionals to adjust our software features to curb with all the changes within that 2 weeks' time frame while supporting all our clients anytime anywhere. TreezSoft cloud accounting software uses automation and integration to reduce the hassle that our clients may experience. All tax code set will be automatically mapped to their respective tax codes by just a few clicks. New tax code will be automatically implemented on all new entries in TreezSoft after that.
Other than that, our system will still maintain the flexibility for our clients to enter any back dated records with the old tax code. You can refer to the blog "Treezsoft Updates - GST Rate Update" for detailed information about the convenience that TreezSoft had brought about to help our clients to cope with the changes in rate.
Want to experience this incredibly convenient accounting journey with TreezSoft like many other users? Click on the box below to sign up for Free 30 days trial with TreezSoft.
For further questions and detailed answers please refer to the official list of FAQ regarding the transitions of GST 6% to 0%.
You can also email us at [email protected] for any enquiries.
