Only 10% of firms registered for GST applying for software subsidy

Many small- and medium-sized enterprises (SMEs) that are eligible for the RM1,000 e-voucher are not aware of it, says Royal Malaysian Customs Department's GST director Datuk Subromaniam Tholasy - Bernama Photo.

KUALA LUMPUR: Only 10% of some 7,000 companies which have registered for the coming goods and services tax (GST) scheme, have applied for the RM1,000 subsidy to upgrade their accounting software to be GST-compliant, says the Royal Malaysian Customs Department.

"Many small- and medium-sized enterprises (SMEs) that are eligible for the RM1,000 e-voucher are not aware of such a benefit," said GST director Datuk Subromaniam Tholasy.

He urged more companies to take advantage of the subsidy and make the application online.

In a move to help businesses ease into the GST implmentation on April 1, 2015, the government is offering eligible SMEs a RM1,000 e-voucher to purchase related software from vendors certified by customs.

"The department has to date certified 113 vendors, and the number will increase over time," Subromaniam told reporters after attending a GST session organised by the Secretariat for Empowerment of Indian Entrepreneurs to brief 14 local Indian organisations on the new tax regime.

The prices of the software, depending on business needs, range from RM800 to ten of thousands of ringgit.

As at yesterday, only 7,000 companies had registered for GST, he said.

It is estimated that around 300,000 businesses in Malaysia, which have an annual turnover of RM500,000, have to take part in the new tax regime.

Up to 90% of those companies were SMEs, Subromaniam said.

He said the department would not give an extension of time for companies and businesses to register once the deadline expired on Dec 31, 2014. Companies failing to register for GST by then can be fined up to RM30,000 or two years' jail or both, or be compounded up to RM15,000.

Businesses needed at least three months to familiarise themselves with the new tax regime, hence the registration deadline by year-end, said the Customs Department. – Bernama 

Meanwhile I Contro Software enforce and implement consistent and comprehensive risk management capabilities that include individual & group-based company credit risk and exposure control and availability of necessary real-time financial and sales information. The tight and profit-oriented integration of the various operating units within an organization will result in better control and manageability. This will create a responsive entity that can act fast in response to any changes in the regulatory environment i.e. GST Regulation

The implementation of the Goods and Services Tax (GST) is one of the key drivers of growth in the Malaysian Enterprise Application

KUALA LUMPUR: The implementation of the Goods and Services Tax (GST) is one of the key drivers of growth in the Malaysian Enterprise Application (EA) market, according to International Data Corporation (IDC).

It expects 2014 to be a much better year compared to 2013 and the tax implementation would be a boost to many EA vendors as this forces business to either upgrade or replace their legacy system with a system that is GST-compliant.

“With the GST coming into effect in the early part of 2015, we predict there will be a scramble from the businesses to be fully GST-ready in line with government regulations,” - the borneo post

I Contro Software enforce and implement consistent and comprehensive risk management capabilities that include individual & group-based company credit risk and exposure control and availability of necessary real-time financial and sales information. The tight and profit-oriented integration of the various operating units within an organization will result in better control and manageability. This will create a responsive entity that can act fast in response to any changes in the regulatory environment i.e. GST Regulation

GST: A regime to remove multiple taxation

In the sphere of indirect tax reforms in India, introduction of the Value Added Tax (VAT) at the Central and the State level has been considered to be a major step. The next logical step – towards a comprehensive indirect tax reforms in the country is the Goods and Services Tax (GST).

 

 Goods and Services Tax -- GST -- is a comprehensive tax on manufacture, sale and consumption of goods and services at the national level. Through a tax credit mechanism, this tax is collected on value-added goods and services at each stage of sale or purchase in the supply chain.The system allows the set-off of GST paid on the procurement of goods and services against the GST which is payable on the supply of goods or services. However, the end consumer bears this tax as he is the last person in the supply chain.

 The illustration shown below indicates, in terms of a hypothetical example with a manufacturer, one wholesaler and one retailer, how GST will work. Let us suppose that GST rate is 10%, with the manufacturer making value addition of Rs.30 on his purchases worth Rs.100 of input of goods and services used in the manufacturing process. The manufacturer will then pay net GST of Rs. 3 after setting-off Rs. 10 as GST paid on his inputs (i.e. Input Tax Credit) from gross GST of Rs. 13. The manufacturer sells the goods to the wholesaler. When the wholesaler sells the same goods after making value addition of say Rs. 20, he pays net GST of only Rs 2, after setting-off of Input Tax Credit of Rs. 13 from the gross GST of Rs. 15 to the manufacturer. Similarly, when a retailer sells the same goods after a value addition of (say) Rs. 10, he pays net GST of only Re.1, after setting-off Rs.15 from his gross GST of Rs. 16 paid to wholesaler. Thus, the manufacturer, wholesaler and retailer have to pay only Rs. 6 (= Rs. 3+Rs. 2+Re. 1) as GST on the value addition along the entire value chain from the producer to the retailer, after setting-off GST paid at the earlier stages.

 The era of GST will replace all direct taxes levied on goods and services by the Central and State governments. The implementation of GST will lead to the abolition of other taxes such as octroi, Central Sales Tax, State-level sales tax, entry tax, stamp duty, telecom licence fees, turnover tax, tax on consumption or sale of electricity, taxes on transportation of goods and services, etc, thus avoiding multiple layers of taxation that currently exist in India.

 Almost 150 countries have already implemented the GST. Most of the countries have a unified GST system. Brazil and Canada follow a dual system where GST is levied by both the Union and the State governments. France was the first country to introduce GST system in 1954.It has been a part of the tax landscape in Europe for the past 50 years and is fast becoming the preferred form of indirect tax in the Asia Pacific region. It is interesting to note that there are over 40 models of GST currently in force, each with its own peculiarities. While countries such as Singapore and New Zealand tax virtually everything at a single rate, Indonesia has five positive rates, a zero rate and over 30 categories of exemptions. In China, GST applies only to goods and the provision of repairs, replacement and processing services. It is only recoverable on goods used in the production process, and GST on fixed assets is not recoverable.

 It is estimated that India will gain $15 billion a year by implementing the Goods and Services Tax as it would promote exports, raise employment and boost growth. It will divide the tax burden equitably between manufacturing and services.

 Prior to the introduction of VAT in the Centre and in the States, there was a burden of multiple taxation in the pre-existing Central excise duty and the State sales tax systems. Before any commodity was produced, inputs were first taxed, and then after the commodity got produced with input tax load, output was taxed again. This was causing a burden of multiple taxation with a cascading effect. When VAT was introduced in place of Central excise duty, a set-off was given, i.e., a deduction made from the overall tax burden for input tax. With VAT, the problem of “tax on tax” and related burden of cascading effect was thus removed. There is a built-in check in the VAT structure on tax compliance in the Centre as well as in the States, with expected results in terms of improvement in transparency and reduction in tax evasion.

 Introduction of VAT in the States has been a more challenging exercise in a federal country like India, where each State, in terms of Constitutional provision, is free in levying and collecting State taxes. Before introduction of VAT, there was also no harmony in the rates of sales tax on different commodities among the States. Not only were the rates of sales tax numerous and different from one another for the same commodity in different States, but there was also an unhealthy competition among the States in terms of sales tax rates – so-called “rate war”– often resulting in, revenue-wise, a counter-productive situation.

 It is in this background that attempts were made by the States to introduce a harmonious VAT in the States, keeping at the same time in mind the issue of sovereignty of the States regarding the State tax matters. The States started implementing VAT beginning April 1, 2005. Responses of industry and also of trade have been indeed encouraging. The rate of growth of tax revenue has nearly doubled from the average annual rate of growth in the pre-VAT five year period after the introduction of VAT.

 Despite this success with VAT, there are still certain shortcomings in the structure of VAT both at the Central and at the State level. The shortcoming in CENVAT lies in non-inclusion of several Central taxes in its overall framework, such as additional customs duty, surcharges, etc., and thus keeping the benefits of comprehensive input tax and service tax set-off out of reach for manufacturers/ dealers. In the existing State-level VAT structure there are also certain shortcomings.  There are, for instance, even now, several taxes which are in the nature of indirect tax on goods and services, such as luxury tax, entertainment tax, etc., and yet not subsumed in the VAT. Moreover, in the present State-level VAT scheme, CENVAT load on the goods remains included in the value of goods to be taxed under State VAT, and contributing to that extent a cascading effect on account of CENVAT element. This CENVAT load needs to be removed. Furthermore, any commodity, in general, is produced on the basis of physical inputs as well as services, and there should be integration of VAT on goods with tax on services at the State level as well, and at the same time there should also be removal of cascading effect of service tax. In the GST, both the cascading effects of CENVAT and service tax are removed with set-off, and a continuous chain of set-off from the original producer’s point and service provider’s point upto the retailer’s level is established which reduces the burden of all cascading effects.This is the essence of GST, and this is why GST is not simply VAT plus service tax but an improvement over the previous system of VAT and disjointed service tax. 

TO BE CONCLUDED...

The author is Commercial Taxes Officer in Jammu and Kashmir Government.

http://timesofindia.indiatimes.com/

Parliament has approved the GST Act and it has now become law.

Parliament has approved the GST Act and it has now become law.

“This proved that the government is serious with implementation on April 1, 2015, therefore the local companies whose turnover exceeds RM500,000 must register under the GST regime and prepare themselves with GST compliant software.”

Although the government now was in its first phase (from July until September) of the implementation whereby it would provide awareness campaign and training to the businesses, it also urged them to make an effort to make early preparations to avoid problems come April 1, 2015.

The second phase, from October until December, are when companies are supposed to get their businesses a GST-compliant financial system during that three-month period.

“The third phase would be in the first three months of 2015 where we run the GST trial before it really kicks off on April 1,” he added.

“Come April 1, 2015, GST will replace SST with a 6% rate to be impoased on certain goods and services but not on essential goods namely such as processed meat, cooking oil, sugar and essential services like electricity,”education, healthcare, toll, financial transactions and life insurance. - bernama

iContro Software Sdn Bhd, the local Enterprise Resource Planning (ERP) software specialist, predicts that businesses, especially in the manufacturing sector, will experience a “chaotic period” in trying to replace their legacy IT systems with GST-compliant ones. However, the introduction of GST is expected to be complicated for Malaysia’s manufacturing sector because the ERP system will need to accurately identify and capture the tax imposed or items exempted at the various raw material processing stages of goods being manufactured. - thestar 

Many companies and businesses are still vague about the GST.

KUALA LUMPUR: With the goods and services tax (GST) to be implemented on April 1, 2015, the clear message to all companies is to start preparing early. Don't wait!

The sooner they start, particularly in incorporating GST-compliant software and training, they can avoid bottleneck situations most likely to happen closer to the implementation date.

As the just-ended National GST Conference 2014 organised by Malaysia's national news agency Bernama and Tax Advisory and Management Sdn Bhd (TAMS), showed, many companies and businesses are still vague about the GST.

With the effective date of implementation less than nine months away, one can assume that time is running out, more so, since most firms seem to be adopting a "wait-and-see" mindset in preparing themselves.

Obviously, the state of readiness among companies is far from satisfactory, but the lack of understanding is an unacceptable explanation for avoiding to prepare.

Some participants admit being far from ready and certain companies said they are unwilling to make a major conversion ahead of the Budget 2015 announcement.

It is true that concerted efforts at all levels, especially from the government and its agencies - particularly the Royal Malaysian Customs Department - is needed to ensure businesses are adequately prepared.

But companies themselves need to play a more proactive role in seeking information and assistance.

This is because the GST will affect all businesses, whether they sell goods or provide a service and their state of preperation matters.

It will also impact all parts of operations starting from the IT system, procurement, sales and marketing, the price setting department, supplier and customer relationships to cash flow.

TAMS’ Executive Director Yong Poh Chye said normally it takes about 18 months for companies to prepare for the GST, but they now had only nine months to do so.

Time is running out and they have to redouble efforts to ensure their businesses are GST-compliant by the time of implementation, he said.

Yong explained that companies needed to train their staff on the GST, acquire GST-compliant accounting software and commence trial runs by January 2015.

At present, he said only 50 per cent of companies in the country were GST ready.

"Many businesses are unaware that they need to upgrade their accounting software to comply with the GST," Yong added.

Such software upgrades cannot be done at the last minute, as extensive preparation and training is required.

There is plenty of assistance being given by the government to ease this conversion process, especially for small and medium scale enterprises (SMEs).

The government allocated RM150 million under the Budget 2014 to assist SMEs in purchasing the GST compliant accounting software or for upgrades, to be GST compliant.

This includes encouraging SMEs to use an effective and efficient accounting system as well as increase the GST compliance rate.

Financial assistance is also provided by SME Corp Malaysia in the form of a GST eVoucher worth RM1,000.

In addition to the allocation to purchase the GST software, the government is also providing training grants worth RM100 million to businesses to send their employees for training in 2014 and 2015 on the new tax regime.

This includes an accelerated capital allowance until the year of assessment 2015 for the cost of purchasing ICT equipment and software, tax deduction on expenses incurred for training in accounting and ICT related to GST for the years of assessment 2014 and 2015.

Others incentives are a reduction in the corporate tax rate from 20 per cent to 19 per cent from 2016 for small businesses and tax deduction for secretarial fees and tax filing fee from 2015.

It is estimated that almost 25 per cent of SMEs (around 160,000 businesses) will find themselves embracing the GST at the registration threshold value set at above RM500,000 a year.

SMEs with annual sales of less than RM500,000 are advised to evaluate and volunteer to be in the GST system, which will bring many advantages over the longer term. The GST at six per cent is aimed at enhancing the efficiency of the tax collection system. - Astro

“Currently we know of (just) over 270 items that will be exempted from GST, and this does not include the various state, zone or incentive tax inclusions or exemption that apply to specific manufacturing businesses operating in Malaysia,” Lee said.

“With no prior experience or local business knowledge in implementing a GST-compliant system for a core IT systems as massive as the ERP, many foreign IT brands will find it challenging to support their manufacturers customers,” he added.

According to Lee, Australia – which adopted the GST six years after Singapore – emulated the island state’s implementation. And despite Australia having a much more organised business culture compared to Malaysia, it took the Australians almost three years to arrive at a stable, workable model.

“This is why Malaysian businesses, especially those in the manufacturing sector that have the gigantic ERP that is heavily ‘system-affected’ by GST, need to wake up now to the enormous work at hand.

"The best advice is to start making crucial decisions on your ERP system now,” Lee advised. - the star malaysia

Implementing GST-compliant IT system will be chaotic

KUALA LUMPUR: iContro Software Sdn Bhd, the local Enterprise Resource Planning (ERP) software specialist, predicts that businesses, especially in the manufacturing sector, will experience a “chaotic period” in trying to replace their legacy IT systems with GST-compliant ones.

“When it finally dawns upon the majority of Malaysian manufacturers that their ERP system are simply too old to be upgraded to be GST-compliant, there will be a mad scramble by the top management to put ERP overhaul as the priority of their IT budgets,” CEO Frank Lee warned.

He pointed out that Deloitte Malaysia had estimated that less than 5% of businesses had started getting themselves ready.

Lee thinks problems within the local manufacturing scene may crop up as early as the first quarter of 2014, and continue till the implementation deadline of the GST on April 1, 2015.

ERP software – which integrates all facets of an operation, including product planning, development, manufacturing processes, sales and marketing – needs to comply with the requirement of the GST when it goes into effect.

However, the introduction of GST is expected to be complicated for Malaysia’s manufacturing sector because the ERP system will need to accurately identify and capture the tax imposed or items exempted at the various raw material processing stages of goods being manufactured.

“Currently we know of (just) over 270 items that will be exempted from GST, and this does not include the various state, zone or incentive tax inclusions or exemption that apply to specific manufacturing businesses operating in Malaysia,” Lee said.

“With no prior experience or local business knowledge in implementing a GST-compliant system for a core IT systems as massive as the ERP, many foreign IT brands will find it challenging to support their manufacturers customers,” he added.

According to Lee, Australia – which adopted the GST six years after Singapore – emulated the island state’s implementation. And despite Australia having a much more organised business culture compared to Malaysia, it took the Australians almost three years to arrive at a stable, workable model.

“This is why Malaysian businesses, especially those in the manufacturing sector that have the gigantic ERP that is heavily ‘system-affected’ by GST, need to wake up now to the enormous work at hand.

"The best advice is to start making crucial decisions on your ERP system now,” Lee advised. - the star malaysia

iContro reveals largest challenge faced by process-based manufacturers in Malaysia and region

Dismal level of ERP ‘Computerisation’ in Local Manufacturing Sector 

Enterprise Resource Planning (ERP) specialist iContro reveals largest challenge faced by process-based manufacturers in Malaysia and region

KUALA LUMPUR, 26 November, 2013 – iContro Software Sdn Bhd (‘iContro’), 100% homegrown, Malaysia-based ERP provider, today shared its recent findings on the current state of computerisation in the Manufacturing sector, the 2nd largest economic industry in the country. 

Frank Lee, CEO of iContro, says that despite the great progress in other ICT areas such as mobility, digital media, Big Data and cloud computing; the advancements in the biggest enterprise system – the Enterprise Resource Planning (ERP), is still sadly lacking.

“The behemoth ERP system is the core of all large enterprises and business operations whether in the public sector, telco, financial and retail. Yet, the advancements and technological upgrades within the ERP is one of the slowest and most painful.”

Lee particularly singles out the state of ERP systems in Process-based manufacturers, which he deduced is still ‘…at a very basic level of computerisation and automation’.

EXPLANATION NOTE: Manufacturing is generally divided into two types - Process and Discrete, whereby the earlier is highly complex as it involves products that cannot then be broken down into its component parts once produced.  Examples of process manufacturing include chemicals and raw material substances, oil & gas fuels, pharmaceutical goods and bio-engineered.

“As a significant portion of local manufacturers are process-based, it is not far-fetched to assume that this is currently one of the least automated sectors in the country, despite it being a top economic activity for Malaysia.”

In addition to the ERP systems of process-based manufacturers being the least ‘computerised’ or ‘automated’ of all other manufacturers, iContro estimates that less than one third of Malaysia-based process manufacturers even deploy an ERP system for their operations. 

“The main reason for this dismal ERP phenomenon in Malaysia and the region, is because most ERP systems available cannot cope with the highly complex nature of  process-based manufacturing.

Even if they have some kind of ERP system, they are mostly limited to handle the manufacturers’ financials, distribution or HR functions only instead of being optimised to integrate and automate the actual and entire process manufacturing operations,” explains Lee.

iContro Dominates in Paints

Over the last 18 years, iContro has been focusing on developing and providing ERP systems for complex business operations. The company today offers a comprehensive suite of ERP solutions across sectors, but hold current dominance of paint manufacturers (which are in the category of process-based manufacturing).

“Most of the paint manufacturers in Malaysia today use iContro as their default ERP – simply because it works extremely well to support all the complexities in their niche operations, and is much more affordable than other international ERP brands in the market,” shares Lee.

Besides continual upgrades to these existing manufacturing clients, he says that iContro is getting interest from players in other sectors such as Building Materials related, Oil & Gas and Property. 

 “The ERP market in Malaysia is slowly but surely undergoing a transformation as companies scrutinize that the capabilities of their IT purchases can actually perform what the business requires, in the face of ever growing competition in the Market Place” he ends.  

***

About iContro Software Sdn Bhd

iContro Software Sdn. Bhd. is an Enterprise Resource Planning (ERP) solutions provider which has designed the iContro G5 ERP. The company is among the first ERP in the world to be TUV-Certified with their system achieving an overall compliance of 93%. iContro provides improvements to business processes and performance based on the best practices of Asian Business Culture Paradigm, championing the "LEAN, SPEED & CONTROL" business model. The company develops products with the technological foresight to provide high quality business solutions which enhance the financial operations and management capabilities of many small & medium-size corporations. 

iContro’s clientele includes DGL (Australian Paint Manufacturer), Teikoku (Japanese Ink Manufacturer), Hume Marketing and Damansara Realty Berhad amongst many others.

CIO Asia