Advantages

Greater transparency

Relative to the existing system, under the GST regime, consumers would benefit as they
will know whether the goods they consume are subject to tax and the amount of tax they
would have to pay.
Enhanced compliance
The current sales and service tax (SST) system has been criticised for having many
weaknesses, causing difficulties in its administration. The GST system is said to be more
efficient with an in-built mechanism to make the tax administration self-policing and will
thus enhance compliance.
No additional charge in GST
GST eliminates double taxation under SST. Consumers will thus pay fairer prices for
most goods and services compared to SST.
Fairness and equality
With the GST, taxes are levied fairly among all the businesses involved, whether they are
in the manufacture, wholesale, retail or service sectors.

Disadvantages

Cost of doing business will increase.

The Account Department needs to do more paper works. Construction companies act like
an agent for the Government in collecting taxes. There is a need for the accounting
system to be changed in view of the implementation of the GST.

Accounting System

The accounting system is affected as there is a need to generate two separate reports
which are:

Revenue subject to GST and payable to the Government

Cost Incurred reimbursable from the Government

Administrative Cost
There will be more administrative cost incurred since there is a need to track every
transaction and show evidence on the revenue and cost incurred. The liability is on the
construction companies to submit the report to the Government on time. If not, penalty
will be imposed. Records have to be kept for seven years.

Problems or administrative difficulty

Problems or administrative difficulties that affect the day-to-day business of construction
companies with the implementation of GST include:

When the GST regulation was implemented for the first time, the accounting system
needed to be changed to accommodate GST. It was very tedious to do it manually.
Currently, there is an abundance of accounting software which helps compute GST
and hence the problem is solved.

Cash flow may be affected if the tax amount is substantial. As an example, a

construction company needs to pay the cost of the goods and GST when buying goods
at the initial stage. However, the actual installation on site may be done only in about
6 to 12 months time. The contractor can then claim the GST amount from the client.
Hence, careful planning is required.

If the construction company is NOT GST registered, its supplier who is a GST
registered company will be able to bill the company but yet the company cannot
claim/ reimburse from the Government. It will affect cash flow as the company has to
incur additional costs.

Whether the tax invoice is to be based on the certified amount or actual collection will
have an impact on the cash flow of the company. There is a need to have a separate
agreement with the client.

Revenue and sale will not tally with the tax form because of the need to accrue the
revenue and cost every month as the Architect Certificate comes later. Furthermore,
retention sum may takes years before it will be released but still require to accrue the

revenue. Hence, the construction company needs to do reconciliation for the revenue
and the cost portion. This will result in more administrative/paper work.