Malaysia GST goes to zero swiftly — how do you get ready when running Oracle?
With the change in government in Malaysia, the new Prime Minister swiftly delivers on his promise to remove GST. Last night they announced the change from 6% to 0% effective June 1st, 2018 (2 weeks from now)
This may sound like a small change of simply changing the rate but the reality is that this requires companies to act swiftly to be ready to stay in compliance. A quick FAQ has already been published on the Malaysian Customs website.
For companies this means that your systems will quickly need to updated to reflect the changes. During the transition you will need to manage transactions which has both zero rated GST as well as 6% GST. You tax configurations will need to be modified and both master data and open/pending transactions will need to be modified.
Symprio, one of the leading Oracle consulting partners in Malaysia, has quickly started to define the action plan for what needs to be done to address these changes in Oracle eBusiness Suite.
The business users would need to be trained for how to manage the change.
Below are the key considerations for how you should manage this change within Oracle eBusiness Suite:
(1) On the date of June 1st all invoicing should now be zero-rated. This means that the tax codes defined on master data such as items, customers, suppliers, transaction types etc. needs to reflect on that date the change.
We recommend to use API scripts for master data to update to zero-rated GST so new transactions created after June 1st defaults with zero-rated GST.
(2) Credits/returns from pre-June-1 should still reflect the 6% GST. So for example if you sold/purchased something from before June 1st with 6% GST and now this is returned, the credit memo should reflect the 6% GST. How long you should do this however is still not clear. Assume then that those would get refunded by the government as you would not be collecting anymore GST beyond June 1st. Because of this you will still need to retain the 6% GST tax code.
For companies which have a flexible returns policy you can expect really a large number of returns. Basically customers can come return, get refund with GST, then go buy the product again without GST (good for customer/bad for government tax collector).
(3) If you receive invoices with invoice date beyond June 1st from suppliers with 6% GST those should be rejected and request for amended invoice to zero rated GST.
(4) All pending sales orders which has the old GST tax code applied should be modified on June 1st so any shipments & invoices which goes out after June 1st goes out with zero-rated GST.
The sales orders can be updated with the new tax code using Mass Change feature (Doc ID 2345571.1) if you are using 12.1.3 or later.
Query all the order lines in Order Organizer and then go to Tools>Mass Change>Lines>Pricing Tab> then specify the new zero rated tax code and apply.
Once that is done all shipments from that point forward should apply using the zero rated tax code when invoiced.
(5) Purchase orders are going to be more challenging than sales orders given that you are not in control of when invoice is generated. During the transition (i.e. June 3rd) you will still be receiving and processing invoices from before June 1st. Those will and should have 6% GST on them.
Given that for at least a period of a few weeks you will be processing invoices both with/without 6% GST and Zero rated GST we would recommend to enable the option in eBusiness Tax module to Allow Override of Tax Classification Code. This way if an invoice referencing the PO which has 6% GST you can change in Payables to Zero rated and vice versa. This way you retain the flexibility during the transition.
Fundamentally since the PO was issued with 6% GST the PO should now either be revised for the remaining balance to reflect the new Zero rated GST or alternatively go ahead and issue new Zero rated Purchase Orders with the remaining balance.
There is currently no direct way to update the tax code on the Purchase Orders via API, however there is a workaround by updating which we have tested worked.
The cleanest way which would also be communicated to supplier would be to recreate (execute a PO conversion) with the remaining open balances for the Purchase Orders and then cancel the remaining balance of the purchase orders. This however would require communication to the suppliers that new invoices from after June 1st should reflect the new PO number which applies Zero Rated GST.
(6) Modify the necessary tax applicability rules, defaulting rules and setups in eBusiness Tax, Order Management, Purchasing, Accounts Payable, Accounts Receivables, iExpenses and General Ledger to reflect zero-rated GST.
We have drafted the typical configurations which will need to be modified to be reflected.
(7) Assessment of existing tax reports. Impact should be limited as for a relatively long period of time the submission of the GST-03 tax report. Zero rated sales should still be declared in column 10.
Please feel free to contact us at email@example.com for additional details or if you require any help with making the switch.