1. Deposit Received is not accounted for GST
Payments received before delivery of services or goods are subject to GST. Some firms account for GST by issuing Tax invoices after goods are delivered. However, the timing to charge and account for GST would not be in accordance with the law and it will be subject to penalty as well. Furthermore, tax invoices should be issued within 30 days upon the receipt of deposit.
2. Disposal of Fixed Asset is not accounted for GST
Disposal of fixed asset shall be accounted for GST and shall comply with the Tax invoice rule except Investment in GST-exempted items and passenger motor car purchased after GST era.
3. Foreign Currency Tax invoice
Any GST Taxable sales transaction denominated in foreign currency shall also comply with Tax invoice rule. Local currency of the transaction and GST amount shall be displayed in your Tax invoice for compliance purpose.
4. Related-Company Transaction with Open Market Value
Transactions with related company are commonly seen in group account, such as management fee, supply of manpower, sales and purchase of inventory at lower price etc. If some of the related entities are non-GST registered, the inter-company transactions are challengeable by officer whether they are on arm-length basis.
5. Confusion between Standard-rated and Zero-rated items
Often in small business of groceries shop and multi-item wholesaler, due to frequent update of Custom’s Zero-rated order, their accounting and operation people tend to be confused on whether they identify their product GST identities correctly.The relevant business accounting persons shall all the while be alert of custom updates and familiarize themselves with the tariff codes of their business products to understand the Custom’s Zero-rated order.
6. Applying wrong Tax Codes
Not familiar with their accounting system and tax code mapping will cause errors in GST computation and also, disclosures required in GST-03. We can always see there is always errors in capital good, bad debt relief related and exportation disclosures. Incorrect return offences may be Custom’s next focus after the GST compliance of the overall market getting matured.
Custom has tightened the usage of Disbursement in today’s tax invoices. Disbursement is not subject to GST. However, it is worth noting that not everything out-of-pocket is considered disbursement in GST, such as Travelling, Printing and Stationeries. Those are considered as Reimbursement and are subject to GST. Please refer to relevant DG’s Decision to understand Custom definition of disbursement.
8. Incentive rebates
Incentive rebates often happen in trading business, where the actual incentive will be normally accounted via credit notes. However, credit notes have now been regulated and they must be referenced back to original tax invoices. Due to excessive number of invoices involved, the recipient of the incentive shall be encouraged to issue a Tax invoices for incentives claim in order to comply with GST regulations.
9. “Expired” Input Tax Credit
Input tax credit is allowed to be claimed even though the invoice date is not within that GST period. However, any unclaimed credits that have been carried forward for more than 1 years are not allowed to be claimed directly in the GST return. Company have to write in to Custom to obtain approval. Another common misconception worth mentioning here is, all input tax except for capital good incurred before GST effective date (refer to your GST approval letter), are not claimable.
10. Gift rule
A lot of accountants tend to avoid the computation of deemed supply of GST gift rule as they are not allowed to claim their gift’s input credit. According to relevant public ruling and DG decisions, we are still required to compute and disclose the deemed supply’s GST amount in GST-03 although we are not claiming the input.
Is your company still having issues with accounts and GST compliance? There are 4 possible reasons that you might have overlooked:
1. Not having a really qualified Financial Controller/ Accountants to solve your problems
Accountants are trained to detect risks and errors yet most are not experienced enough to resolve GST-related issues. Knowledge and hands-on experience are equally important as GST is a transaction-based tax. Adding to that, human errors are unavoidable if your accounting staff are doing repetitive job on a daily basis.
2. Not having a good accounting software
In today’s market, a good and affordable accounting software is easy to find and most of the solutions can cater to small medium businesses’ needs. However, SMEs have to be willing to fork out enough budget on the training and maintenance to ensure that their staff are well-informed of latest software updates.
3. Not having a robust accounting policy
Policy is an important piece for GST compliance. In small-sized businesses, they are not getting used to create a written policy and make relevant personnel to follow. Segregation of duties lead to better efficiency, however the integration amongst all personnel are more important in order to create synergies and reduce process waste time.
4. Not having sufficient budget and efforts to maintain the above resources
It takes a whole lot to hire and retain a good accounting team and monetary incentives are definitely one of the important factors that have direct impact on their working spirits, lifestyles and motives. If your company is facing constraint in budget and management resources, you will be better off outsourcing your accounting work to a professional accounting firm.
All in all, it is common that SMEs outsource their accounting work to an outside professional accounting firm especially after GST is launched in Malaysia. To date, Bispoint Group has proudly assisted more than 500 SMEs in GST compliance and many other accounting needs. If you are interesting in finding out more, please contact us at +603-8938-1773 / +6010-2183-690.