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Avoiding GST ‘Chaos:’ Lessons from Malaysia

As India approached the July 1 implementation of its Goods and Services Tax (GST) framework, heated commentary about the challenges of GST compliance began appearing. One article, “Adding to the Chaos,” which appears in Business Today, a leading India-based business magazine, warned that GST’s multiple rate structure for the same good or service could “create new problems even as it solves some old ones.”

GST compliance will pose challenges for companies conducting business in India; some companies and tax functions will confront more challenges, and more intense issues, than others. As such, tax leaders facing GST compliance challenges should consider some lessons learned from another country’s recent GST implementation.

In 2015, Malaysia implemented a GST. Although the specifics of Malaysia’s GST tax framework differ from that of India’s, companies faced some of the same implementation and compliance hurdles those conducting business in India are experiencing now.

A new PwC report is designed to help Gulf Cooperation Council countries comply with the coming implementation of Value-Added Tax (VAT) in that region of the Middle East; the document contains a section devoted to lessons learned from Malaysia’s GST implementation. Page 9 of the report features a helpful overview of those hard-earned insights. The primary takeaway, according to PwC, is basic but crucial: start planning your implementation early. You’ll need time to complete several critical steps, including:

  • Facilitating responses from senior management on issues where their guidance is needed
  • Identifying IT systems impacted by the new tax and assessing the need for upgrades, modifications, or new infrastructure
  • Deciding whether to use in-house resources to handle the project or outsource to third-party consultants.

Take a look at the complete checklist in the report, which will likely serve as a useful resource as more regions and countries move ahead with major tax reform.

According to Jo Bello, PwC global indirect taxes network leader, their experience shows detailed training outlining new activities and controls is crucial and VAT compliance cannot be implemented just in the tax team, but throughout the organization, which will be a key element to success.

Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information.


About this Contributor

Thomas Steppe Headshot
Thomas Steppe
Global Tax Leader with the Indirect Tax Research

Thomas Steppe is a Global Tax Leader with the Indirect Tax Research department. In his role, he is responsible for the global VAT research content for Vertex’s tax technology solutions. Thomas has more than 12 years of experience in VAT, both in consulting and as an in-house VAT manager, and holds a Master’s Degree in accountancy and applied economics.

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