Any one looking at the issue of the impending implementation of the Goods and Services Tax (GST) will notice the glaring lack of participation by the business community. In April 2014 there were reports about the low registration rate of 3.33%or 10,000 out of the potential 300,000 businesses that fall into the GST realm. As of September 27, 2014, this figures was raised to 56,000 or 18.7%, but it is still fall short of expectations. With only less than four months to the December 31, 2014 deadline, there has been reports that the authorities have indeed scaled down their expectation to less than 200,000 registrants only.
The topic of why people are not registering for GST in Malaysia is the cover story of the last print edition of The Heat.I wrote a supporting article to cover this story, bringing to attention the frivolous details demanded by the GST registration process and the many ambiguities which are made complicated by few and cryptic clues. Irrelevant details were asked from the registrants. This is made worse by the requirement for registrants to know the kind of inputs (called “Supply”) that they need to classify in order to compute their turnovers.
According to published reports, 90% of the businesses that fall into the realm of GST are small and medium enterprises (SME). The RM1,000 government grant given to companies to upgrade their accounting systems to incorporate the GST saw only 10% of the GST registrants claiming this benefit. It seems that the majority of business owners are adopting the “wait and see” attitude. It is obvious that both the “carrot” and the “stick” are not working.
Based on the various ambiguities, cryptic requirements, lack of instructions on where to obtain further information such as codes etc., one can conclude that it is a big challenge for the average small business owners to register for GST unless they or their staff has experience in accounting or tax filing work.
From this one can surmise that the printed version of the GST registration form is an “imperfect clone” of its online counterpart. It is also clear that the printed version (to a certain extent the online version as well) lacks usability and not at all user-friendly. The design and “transformation” from the online version to the printed version was not well thought through. A lot of the explanations and choices of codes etc. that appear on the online version were not incorporated in the printed version nor were these put in the GST Guide.
In view of the need to engage all businesses with or anticipating an annual turnover of RM500,000 to register for GST, Royal Malaysian Customs Department should:
- link up the GST registration system with that of the Inland Revenue Board and Company Commission of Malaysia so that there is a chance to streamline the GST registration process.
- re-evaluate the design of the printed version of the GST registration form to make it user-friendly with additional instructions and information as highlighted in this article.
- take a leaf from the IRB’s success with the e-filing of tax returns by conducting workshops and creating labs to guide business owners to have a painless GST registrations.
- give as much flexibilities and allowance for errors to GST registrants so that they do not have to worry about giving wrong estimations and specifically mention this fact in the form.
Finally, the power that be could also think less about using the “stick” but more about providing more appropriate “carrots” in the form of financial incentives for business owners who complied with the deadline for GST registration for example giving the first RM500 GST waiver to those who complied. The provision of a modest grant, say RM300 per small business owner to engage professionals to help them to register for GST could also be a good move to ensure compliance and adhering to the deadline which may allow the target 300,000 registrants to be reached.