KUALA LUMPUR: The Ministry of Finance (MoF) is investigating the reasons why some businesses ceased operations following the implementation of the goods and services tax (GST), the Dewan Rakyat was told yesterday.
Second Finance Minister Datuk Johari Abdul Ghani said the investigation was aimed at determining whether the closures of the companies was related to the implementation of the GST.
The ministry has received several reports that some businesses closed shop to avoid their tax evasion records under the sales and service tax (SST) from being detected by the GST system, he said when winding-up the debate on the Supply Bill 2018.
“Most of these companies, which have been operating for 18 to 20 years, paid 10 per cent SST at a certain sum. (However) when we implemented the GST, they had to pay three times more tax than the SST,” he said.
The higher tax amount is due to the transparency of the GST which prevents companies from concealing their business volume attained under the SST system.
“So, what they did was to close the old companies for fear of their track records during the SST era being detected under the GST. Hence, they transferred all assets to new companies they opened and started the GST system under these new companies.
“They did this so the government could not track their records under the old companies,” he said, adding that various reasons were given for the closure such as losing business interests and wanting to hand over the business to others.
“All these are going to be very legal issues. So what do we do? We say, okay. If you want to close shop, fine. But we will investigate the closed companies,” he said.
The GST was enforced on April 1, 2015 at a rate of 6 per cent, replacing the SST regime, with 553 types of goods and services zero-rated and another 25 exempted from GST. – Bernama