Goods and Services Tax Seamless Integration with
Existing Processes
23 Nov 2005
Cheah Chee Keong – Solution Manager, SAP South Asia
chee.keong.cheah@sap.com
Introduction
Our Prime Minister 2005 Budget Speech extract :
“… The Government proposes to replace both these
taxes (Sales Tax and Service Tax) with a single
consumption tax, based on the value-added
concept. The new tax, known as the Goods and
Services Tax (GST), will be more comprehensive,
efficient, transparent and effective, thereby
enhancing tax compliance ....”
The 2005 Budget
- 10 September 2004
 SAP AG 2002, Title of Presentation, Speaker Name 2
An Overview of GST
 GST is charged on the taxable supply of goods and
services made by a taxable person in the course or
furtherance of business in Malaysia
 It is a multi stage tax on domestic consumption, similar
to Value Added Tax, levied on taxable supply of goods
and services in Malaysia
 Imposed on majority of goods and services with minimum
exemptions and zero rating
 Based on net value at each stage of business transaction
up to retail stage
 Covers all sectors of the economy
 Relies on invoiced-based tax
 It is a tax on consumption and not on investment
 SAP AG 2002, Title of Presentation, Speaker Name 3
Scope of GST
 The GST is based on destination principle
 Levied at all levels of production and distribution of
goods and services supplied and consumed in Malaysia
Made by the taxable person
In the course of furtherance of any business made by the
taxable person; and
On the importation of goods or services in Malaysia
 SAP AG 2002, Title of Presentation, Speaker Name 4
How GST Works
 The taxable person pays GST or input tax on his
business purchases.
 He then adds value to those goods and services. When
the goods are sold or services are provided, GST or
output tax is collected based on the selling price.
 At the end of his taxable period, he submits his return
declaring the output tax and claiming a credit on the
input tax he paid. (Output tax - Input tax)
 If tax on input exceeds the tax on output (normally zero
rated goods), the difference is refunded
 SAP AG 2002, Title of Presentation, Speaker Name 5
How GST Works
Collection of Multi-Stage Tax assuming at 5%
Clay Merchant
Sales Price = RM10.00
GST
= RM 0.50
Total
= RM10.50
Payment to Government
GST collected
= RM 0.50
Less GST paid
= RM -GST payable
= RM 0.50
Crockery Manufacturer
Sales Price = RM50.00
GST
= RM 2.50
Total
= RM52.50
GST collected
Less GST paid
GST payable
= RM 2.50
= RM 0.50
= RM 2.00
5% X (50 – 10)
= RM 2.00
Wholesaler
Sales Price = RM70.00
GST
= RM 3.50
Total
= RM73.50
GST collected
Less GST paid
GST payable
= RM 3.50
= RM 2.50
= RM 1.00
5% X (70 - 50)
= RM 1.00
Retailer
Sales Price = RM100.00
GST
= RM 5.00
Total
= RM105.00
GST collected
Less GST paid
GST payable
= RM 5.00
= RM 3.50
= RM 1.50
5% X (100-70)
= RM 1.50
Total GST paid
= RM 5.00
Consumer
Payment to Retailer
= RM105.00
 SAP AG 2002, Title of Presentation, Speaker Name 6
Value Addedness
5% X (10 -0)
= RM 0.50
Important Notice
 This GST Model is an initial proposal from the Tax
Review Panel
 Any view expressed in the discussion paper is the
view of the Panel and does not represent the official
view of the Government
 The Government reserves the right to change and/or
modify any part of this proposal
 SAP AG 2002, Title of Presentation, Speaker Name 7
Where will GST impact?
 Do you know what are the business processes areas
that GST will impact?
 Do you know if your System is GST Compliant?
 Do you know what it takes to implement GST in your
system?
 How seamless is the integration with the existing
processes?
 SAP AG 2002, Title of Presentation, Speaker Name 8
Business Process Areas where GST will Impact
 Vendor invoicing and customer billing system in your system
 The purchase of goods and services will give rise to GST input tax.
 The sale of goods and services will give rise to GST output tax.
 Payments and refunds of GST with the Kastam Diraja Malaysia
 The supplier of the taxable goods or services is either eligible to
refund or liable for payment of GST tax
 Reports and forms for routine filing and reporting
 Subject to the requirements of the Kastam Diraja, your system will
need to provide the relevant reports and forms to support payments
and refunds, audits and regular submissions.
 Changes in configuration arising from future changes in legislation
 Future budget changes may likely to affect is likely to affect vendors,
customers, goods (material) and GST rates.
 SAP AG 2002, Title of Presentation, Speaker Name 9
Business Process Areas where GST will Impact
 Seeking refunds from Kastam DiRaja
Tax reports must be able to match eligible input tax credits
against taxable output tax
 Bad Debts
GST paid for goods and services sold, but bills cannot be
collected.
Tax reports and invoices must support tax paid for customer
 Business conducted in FTZs, ICDs, outside country, etc.
 SAP AG 2002, Title of Presentation, Speaker Name 10
Where in your system will GST impact?
 It will impact all major system areas:
Inventory
Purchase orders, Debit Notes
Sales Orders, Credit Notes
Accounts Receivable, Accounts Payable
General Ledger
 Configure the relevant tax procedures, tax codes and
tax rates
 Configured the relevant account determination for
GST postings
 GST impact on existing forms
 GST impact on existing reports
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Transitional Issues Actions required NOW
 All existing contracts extending beyond 1 January
2007 should be reviewed
 The GST implications on all existing contracts should
be checked
 The GST implications of new contracts entered into
from now until 1 January 2007 should be considered
 Consider what further actions may be needed as a
result of the above, for example, contact a solicitor
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Impact of not having a GST compliant system
 All GST tax input and outputs forms and reports will
have to be manually generated
Risk of miscalculation, prone to errors
Strenuous and laborious task if the volume is high
 Confidence of your customers and suppliers
 More scrutiny from the relevant authorities e.g. IRD,
auditors
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Some thots ….
…. Businesses that had the least problems with the GST
were those that used a computer package .…
…. Businesses that fared the worst relied on the show box
method or a system of their own design ….
…. The most common error relating to input tax credits
arose from not having a system in place to correctly record
the GST charged by suppliers …..
Excerpts from the article ‘Adjustment to GST keeps accountants on their
toes’
Max Newnham
July 15, 2002
The Age, Australia
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Thank you
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