Mar 5, 2014 (Wed): iContro Software Sdn Bhd (‘iContro’), the leading 100% local Enterprise Resource Planning (ERP) brand and provider, which has been closely involved in the local ERP scene over a decade, foresees that due to the government’s final resolve to implement the 6% GST to replace the current sales and services tax – businesses across all sectors, particularly the hugely-ERP reliant Manufacturing Sector, will be launched into a “…chaotic period as never seen before, in rushing to replace their unworkable legacy ERP systems.”
Its CEO Frank Lee, says that a handful of manufacturers are beginning to realise how little time they have left but, “When it finally dawns upon the majority of Malaysian manufacturers that their ERP system are simply too old to be upgraded to be GST-compliant, that is when there will be a mad scramble by top management to put ERP overhaul as the priority of their IT budgets.”
An April 2012 survey by the Federation of Malaysian Manufacturers (FMM), coincidently shows that over 60% of businesses responded that they were ready to implement GST, while 40% indicated that only basic preparations such as attending seminars and training to familiarise themselves with the GST scheme, have been made.
Deloitte Malaysia more closely estimates that less than 5% of businesses have started getting themselves ready.
Greater Complications for Manufacturing
According to Lee, there will be imminent chaos that will hit the local manufacturing scene – starting as early as the first quarter of 2014 , and carrying on until the last minute prior to the nation’s Goods and Services Tax (GST) implementation deadline on 1st April, 2015.
Furthermore, the introduction of GST is even more complicated for Malaysia’s manufacturing sector because the ERP system will need to accurately identify and capture the tax imposed or exempted details at the various raw material processing stages of the finished goods being manufactured.
Lee says, “Currently we know of over 270 items that will be exempted from GST, and not even including the various state, zone or incentive tax inclusions or exemption that apply to specific manufacturing businesses operating in Malaysia.”
“With no prior experience or local business knowledge in implementing a GST-compliant system for a core IT systems as massive as the ERP, many foreign IT brands will be challenged to supporting their base of manufacturers customers,” says Lee.
He says that there confusion and frustration in swapping over to newer ERP alternatives as many of the large US and European ERP brands will face significant problems to assist their IT budget-strapped manufacturing customers to have a working and proven GST-compliant ERP system.
For the record, today there are over 150 countries worldwide that have already adopted GST. For a quick comparison, Singapore adopted GST in 1994 and Australia in 2000.
In trying to learn from experience, Australia emulated Singapore in GST adoption and implementation. And despite Australia having a much more mature and organized business culture compared to Malaysia, they took almost 3 years to finally stabilise a workable model.
“This is why Malaysian businesses, especially those in the manufacturing sector that have the gigantic ERP that is heavily ‘system-affected’ by GST, need to wake up now to the enormous work at hand. The best advice is to start making crucial decisions on your ERP system NOW,” ends Lee.