4 Costly GST Mistakes that Businesses should Avoid

This is the first of a 4 part series on GST written by Thenesh Kannaa, Partner of TraTax Malaysia

(Speaker for the upcoming Wolters Kluwer workshop, GST Health Check: Ensure Compliance - Avoid Costly Mistakes held in Kuala Lumpur on the 21st of July 2016)

Despite the Royal Malaysian Customs (RMC) conducting many hand-holding programs and issuing many guidelines, including numerous industry guides, mistakes continue to be made by businesses with regards to GST. The purpose of this series of articles is to highlight four of the costly GST mistakes that both SMEs and larger businesses can and should avoid. Today's instalment highlights the aspect of price display.

Display of prices including GST

It is a statutory requirement that if a GST-registered business displays, advertises, publishes or quotes the price of any goods or services that it offers for sale, such prices must be GST-inclusive unless the RMC has approved otherwise. The intention of the law is to ensure that customers pay no more than the price they see. 

This requirement applies to the various documents and communication media such as price tags, price lists, advertisements, restaurant menus and prices stated on websites and quotations. Also, any prices quoted during negotiations should be inclusive of GST unless the supplier has been approved by the RMC to do otherwise.

As an example, it is incorrect for a restaurant to display RM5.00 as the price of a meal in the menu with the phrase ‘price payable is exclusive of GST’ – unless the restaurant has received approval by the RMC to do so (restaurants are not ordinarily entitled to such approval).  The restaurant is expected to display the price inclusive of GST, in this case RM5.30. Note that there is no requirement to display prices inclusive of service charge which is different from GST, but there is a statutory requirement for restaurants and certain businesses to display a statement on the application of service charge.

If convicted for an incorrect pricing display incorporating GST, the penalty could be a fine of up to RM30,000 or imprisonment up to 2 years or both.

Stay tuned for our second instalment!

Thenesh Kannaa is a partner at Thenesh, Renga & Associates (a.k.a. TraTax Malaysia), a firm of tax advisors. He is the author of Wolters Kluwer’s Master GST Guide (2^nd Ed., 2015) and is a prominent speaker on tax topics. He can be contacted at thenesh@tratax.my. Views expressed are his own.