Matta wants grace for GST compliance
Published on: Thursday, October 02, 2014
KUALA LUMPUR: A reasonable grace period of three to six months to test Goods and Services Tax (GST) compliance processes before the stipulated penalties be imposed will be mutually good for all. Ideally, penalties should not be strictly imposed pending appeals for the first to the second year of GST regime.In making this call for the business community as an educational or learning process for both the businesses and the regulators, the Malaysian Association of Tour and Travel Agents (Matta) says the government needs to consider a deferment of three to six months to allow businesses registered under GST law to fully test run their systems for the first tax invoice is scheduled to be issued on April 1, 2015.Matta Inbound Vice President, Tan Kok Liang explained: "All of us have no experience tackling the complexities of the transaction-based consumption tax and we need time to train the appropriate staff, incorporating GST software to our operating system and changing our business model to cope with GST."ADVERTISEMENT "Looking at the heavy penalties imposed by the Royal Malaysian Customs (RMC) for incorrect returns and other offences the Government also should consider waiving all these penalties for at least 1 to 2 years to facilitate and assist GST-registered businesses on implementation."Tan said this as MATTA embarked on its final leg of a nationwide GST seminar sessions to prepare its members for the impending GST implementation.The first session successfully held on September 19 to 20 attended by over 350 members in Kuala Lumpur here was officiated by Deputy Minister of Finance Datuk Chua Tee Yong, followed by Penang/Kedah /Perak on September 22 to 23, Johor Bharu on September 26 to 27, Kota Kinabalu on October 1 to 2 and the final session scheduled in Kuching on October 3 to 4, 2014 for all together totalling to more than 1,500 participants."Due to the overwhelming response and positive feedback from members, Matta will organise additional GST seminars for front-liners, reservations, sales and marketing, operations staff of travel agencies in order for members to manage GST for their respective companies." ADVERTISEMENT Tan noted that the GST treatment for the travel industry is highly complex as it involves selling of products and services which are standard rated, zero rated and exempt supplies in a single tour package.In addition, sale of regional tour packages (for example tour packages sold by Malaysian inbound travel agents involving various stopovers in Thailand, Indonesia, Singapore and Brunei) makes GST treatment more complex and requiring highly trained staff to address the various GST issues in order to submit accurate GST returns. Most of the travel agencies are micro and small companies lacking resources and manpower.
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Furthermore, while the GST Guide on Travel Industry recently issued by RMC has provided some much needed guidance, there are still numerous uncertainties which require further deliberation and clarification from the RMC, without which, GST adoption may be interrupted. Such uncertainties will mean that the tour and travel agencies (and possibly the RMC) may need more time to iron out these challenges unique to the industry added Tan.Tan said "Travel agencies business model have to make necessary changes to manage GST. This includes a redesign new Tax invoice, credit control policies, timing of sales and purchases, pricing and relationship with suppliers and customers."Tan says cash flow impact is inevitable for businesses with extended credit terms. For businesses above the annual threshold of RM500,000, a GST-registered company will have to pay net GST one month after the taxable period even though GST to be collected from customers has not yet been received."We are not entirely sure of the impact on domestic tourism in Malaysia but we hope the impact will not be too drastic at the initial stage. A standard GST rate of 6 per cent is imposed for domestic air tickets for all air transportation within Malaysia."Tan also noted that sale of outbound tour packages (including Haj/Umrah) is a zero rated supply and international air tickets (also zero rated) will not be subject to GST. However he pointed out that the service fee or commission charged by the local travel agent is a standard rated supply.Commenting on the recent GST Guide on the travel industry issued by RMC, Hamzah Rahmat, President of Matta Malaysia highlighted that GST impact on the travel industry would include taxable supplies such as hotel accommodation, domestic transportation / hire of vehicles, inbound tour package, restaurant meals, tickets for entry to exhibitions, entertainment venues, spa services, agency commission, booking fees, tour guide services, inbound travel insurance services, visa fees and other related tourism services, all of which will be subject to standard rate of 6 per cent GST.For GST treatment on land transportation, while taxi will be exempted, excursion bus for domestic tour, limousine and airport taxi, hire and drive vehicle will all be standard rated supplies."For cruise services, cruises-to-nowhere, cruise around Malaysian waters and cruise around International Waters are subject to GST at standard rate," Hamzah added."As tourist destinations, Langkawi, Tioman and Labuan are expected to have a slight advantage under the GST-era compared to other states because these islands are 'Designated Areas' where no GST is chargeable on goods or services in retail shops, restaurants and hotels located therein, thus giving these islands a small cost-advantage for tourists," said Hamzah.Hamzah urged members to register early and start preparations as non-compliance of the GST rules will attract heavy penalties. Additional manpower requirements are needed to ensure compliance.As most of the travel agents have an annual turnover above RM500,000, and would become a GST-registered business, Hamzah advise that travel agencies need to put in place procurement policies that are GST-compatible and notify respective vendors/suppliers that GST-registered vendors/suppliers will be preferred in order for the travel agency to recover Input Tax Credits on the GST incurred on good and services purchased.Stay up-to-date by following Daily Express’s Telegram channel.
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"As responsible corporate citizens, we must ensure our organisation, system and processes are well equipped and able to embrace the implementation of GST," said Hamzah.Meanwhile, head of the Sabah Hotels Association Christopher Chan wants the RMC to comprehensively brief its members on the specific requirements of GST for the hotel industry, not just general guidelines well in time before April 1, 2015.