SELaiCK Alerts 4-2018 – Change in GST Rate + Preparing for the Abolishment of GST/Reintroduction of SST

Dear Valued Clients and Associates

  1. The MoF have just announced on 16 May 2018 a reduction in the GST rate from 6% to 0% wef 1 June 2018. This interim measure is further discussed in Part II below.
  2. We have also compiled some salient points of the impending actual abolishment of GST and the reintroduction of Sales and Services Tax (SST) for your advance consideration.
  3. Please be assured that:
    • we shall continue to keep you informed and updated on GST developments; and
    • our corporate consultancy team, led by our partner, Mr. PF Kok, which have considerable experience in advising the SST/GST is standing by to assist you with the eventual transition from GST to SST.
Salient points of the impending abolishment of GST / reintroduction of SST
I  Preamble
1.       One of core election manifesto of the Pakatan Harapan (PH) is the abolishment of GST.

2.       Upon PH’s success in GE14, our new prime minister have reiterated that the new PH government will honour its election promises, including the abolishment of GST within the first 100 days.

3.       The actual repeal of the GST legislation and the revival of the previously repealed SST Act, which is currently being deliberated by the PH government, is however not expected to be accomplished immediately.

4.       As an interim measure, pending the actual repeal of GST and its replacement with SST, the MoF have announced a reduction in the GST rate from 6% to 0% wef 1 June 2018. Further details are provided in Part II below.

5.       We have also revisited the salient features of SST in Part III, while transitional issues that businesses will have to consider when GST is actually replaced with SST is discussed in Parts IV and V below.

II  Reduction in GST rate from 6% to 0% wef 1 June 2018 (MoF Announcement 16 May 18)
1.       GST rate change a.       GST for local and imported standard rated goods/services will be reduced from 6% to 0% wef 1 June 2018, subject to tabling to the Parliament.

b.       The prevailing GST rates wef 1 June 2018 are summarised below:

Type of goods/services GST rate
Standard rated* 6% à 0% wef 1 June 2018
Exempted Exempted No changes
Zero-rated* Revoked wef 1 June 2018
*    Please engage with your IT consultants  for a timely update of the GST settings in your accounting and financial reporting systems.
2.       Existing GST practices a.       There are NO changes to other existing GST legislations.

b.       GST registrants shall continue to ensure their compliance with existing GST regulations, e.g. issuance of tax invoices, submission of GST returns and input tax credit claims etc.

c.       As such, in the interim period, it is still Business-as-Usual vis a vis GST.

3.       References a.       MoF announcement i.     PDF copy attached for your reference


b.       Gazette Order
III  A recap of the previous SST System
1.       Sales Tax a.       Applied on the importation/manufacturing of prescribed Taxable Goods by prescribed Taxable Persons.

b.       Sales Tax @ 10% is generally applied on taxable goods (with exceptions of 5% and 15% for certain taxable goods).

2.       Service Tax a.       Applied on prescribed Taxable Services made by prescribed Taxable Persons.

b.       Service Tax @ 6% is generally applied on all taxable services.

3.       Key SST Features a.       SST is a single-stage tax i.e. SST become an additional cost to the businesses (there is no concept of Input or Output Taxes as provided in the GST regime).

b.       Point of SST assessment

i.     Sales Tax – Charge at point of invoice

ii.     Service Tax – Charge at point on payment

c.       SST returns are filed manually (vs the electronic filing system under GST).

IV  Preparing for impending abolishment of GST / reintroduction of SST
1.       Re-visiting SST law and regulation a.       Is your company/business considered to be a prescribed Taxable Person?

b.       Does your products/services fall under SST’s prescribed Taxable Goods/Services?

c.       If the answer to the above is YES – review potential pricing adjustments that would be necessary under the SST regime while ensuring that:

i.     General market expectations for price reductions are met; and

ii.     Such pricing adjustments are in compliance with anti-profiteering rules.

2.       Transitional provisions a.       Businesses can leverage on their previous experience of transitioning from SST to GST back in 2015.

b.       With the potential abolishment of GST and reintroduction of SST in 2018, business should be cognizant of the following potential transitional issues and take the necessary steps to prepare and minimise their impact:

i.     Contract review on the potential update of pricing clause in relation to GST to SST, and whether pricing re-negotiation is needed.

ii.     Incomplete transactions under the GST regime

        • Compile a listing such transactions,
        • E.g. importation of machinery/materials; and
        • Assess if steps should be taken to expedite its completion, in order to enjoy the benefit the GST Input Tax claim.

iii.     Unsettled GST issues

        • Compile a list of such issues;
        • E.g. GST refunds, GST audits/clarifications, outstanding claims on previous transition from SST to GST; and
        • Engage with trade associations to ensure resolution of such issues are provided in the transitional provisions.

iv.     Financial impact of refund of GST Input Tax claimed on inventories/assets in-hand.

v.     Housekeeping of the previous GST filing documents for potential GST audit.

vi.     Transitioning accounting and financial reporting software.

V  Proactive engagement with Trade Associations / IT Consultants / Professional Advisors
1.       Engage with your trade associations, e.g. FMM, which represents specific industries to liaise with government agencies to ensure that the industry’s concerns are addressed and commercially viable transitional processes are provided.

2.       Engage with your IT consultants to ensure that IT accounting and financial reporting systems are updated to cater to a SST environment , e.g.

a.       turning off the GST features; and

b.       modifying the sales invoice format etc.

3.       Engage with your professional advisors to ensure that you are informed on developments and updated on the revived SST laws and regulations and the transitional provisions.

Please do not hesitate to contact us if you have any queries or require clarifications on the above.

Best regards

17 May 2018