While individuals look forward to the start of a new year, businesses, particularly small and medium enterprises (SMEs), are bracing for what could turn out to be a challenging year.

Businesses are expected to continue facing challenges carried over from last year as ongoing subsidy rationalisation and higher raw material prices translate to higher costs in business.

Additionally, the impending implementation of the goods and services tax (GST) in April weighs on SMEs and consumers alike, which could lead to lower spending and put a dent in margins.

But it is not all gloom and doom as there is still time for SMEs to put themselves on better footing once the GST is implemented.

Metrobiz spoke with SME Corporation Malaysia chief executive officer Datuk Hafsah Hashim for her take on how GST would affect SMEs in Malaysia.

Metrobiz: How will the implementation of GST affect SMEs?

Hafsah: We expect some impact on the daily operations of SMEs as they are required to have GST-compliant accounting systems. The upgrade will lead to some change of internal processes and procedures.

Also, businesses may need to purchase new ICT hardware and recruit additional employees to handle the GST compliance work. This will affect operational costs. The impact on short-term cashflow must also be assessed because accounting for GST in Malaysia will be on an invoice basis.

Show how it’s done: A Royal Customs Department officer taking a business owner through GST registration at a GST seminar in Southern University College, Johor Baru last October. — filepic

This means businesses have to make the payment of the GST output tax within the deadlines even though the trade debtors have not paid.

SMEs also need to assess if their suppliers are GST registrants. If they are, then the SMEs will be able to claim the GST charged to them as input tax. This will help lower the burden on cash outflows.

SMEs should also ensure their employees attend GST trainings to get some basic knowledge of the Malaysian GST.

How many companies have registered for GST?

As of Dec 5, a total of 188,429 companies have registered for MyGST and out of that, 140,701 are SMEs.

Would SMEs that have not registered be losing out as they won’t be able to claim back their input taxes?

Businesses with annual revenue not exceeding RM500,000 are not required by law to register for GST. However, these businesses can opt for voluntary registration.

SMEs that are not registered, but are doing business with suppliers that are GST registered may indeed lose out as they are not able to claim the input cost incurred on their purchase of raw materials.

Stocking up: Malaysians buying goods during a year-end sale. Some businesses reported increased sales, especially in consumer durable goods, ahead of the implementation of GST. – filepic

They may be at a disadvantage compared with their peers who have registered.

Additionally, SMEs that have registered would benefit from better financial management over time through proper record keeping, having trained staff and by moving towards the use of electronic payment. All this enhances the overall efficiency and productivity of their organisations.

Does the GST help meet any components of the SME Masterplan in any way?

The implementation of GST encourages SMEs to use more effective accounting procedures with GST-compliant accounting software. If previously, they maintained accounts manually, now it is necessary for them to automate for accurate tax declarations.

In the long term, the enhancement of business processes will lead to better productivity. Raising productivity is one of the goals of the SME Masterplan and we strongly believe that the implementation of GST will play a significant role in achieving this goal.

What help is being given to SMEs to prepare them for the new GST regime?

The government has provided an allocation of RM150mil for SMEs to purchase and upgrade their accounting software. This assistance is available to SMEs in the form of a GST e-Voucher worth RM1,000 each to purchase GST compliant software. SME Corp has given out a total of 129,532 e-Vouchers to SMEs as of Dec 5.

Getting help: Customs officer Nor Shamshida Md Isa assisting Noor Azaliah Jaafar (right) as she registers her company information on the Taxpayer Access Point (TAP) website at the GST Processing Centre in Kelana Jaya. — Bernamapic

The government has also implemented GST outreach and awareness programmes nationwide.

There is speculation that SMEs may raise prices to pay the GST, which they have no intention of claiming back later. What are your thoughts on this?

There is a concern that businesses may use GST as an excuse to arbitrarily raise prices. The GST Monitoring Committee will be monitoring prices closely to prevent price manipulation by profiteering traders.

The Domestic Trade, Co-operatives and Consumerism Ministry will also introduce a Shopper’s Guide with a list of prices before and after GST is introduced for goods and services under the Consumer Price Index.

SMEs need to evaluate the potential impact of GST on their pricing and plan ahead to manage their cost. Some of the possible cost-cutting measures include automation, using e-commerce and e-payments as well as reducing foreign workers.

How can SMEs cope with the changes that will come with the implementation of GST?

SMEs should equip themselves with knowledge and embrace change. Being well prepared is the key to cope with uncertainties. They need to be pro-active to seek out best practices for their companies under the new GST regime.

They could do some research on how SMEs in other countries adapted to the the implementation of similar tax regimes and pick up a few pointers from there.