Caution : This is not something the taxman (Customs department) would like you to know but the advice here is not against the law with regards to GST in Malaysia
You are starting a new food and beverage (F&B) business because you think you have delicious food to sell. Here are some tips for new F&B ventures to make sure you will survive the first few months, maybe even a year or two, in this new Goods & Service Tax (“GST”) era :
1) There is a threshold of RM500,000 per year before you have to charge GST to your clients. That amount translate to just above RM40,000 per month. You need to calculate an amount for your livelihood after deducting cost which may translate to half of that amount or even lesser.
The threshold set makes sure the businesses which has made enough are taxable under GST. If you are ambitious and cannot wait to make your first million in the first year of your business, you can go ahead and break that threshold and pay your GST. Those who are smarter know the real value of a business is in its longevity, be patient.
It is a marathon and not a 100-meter dash after all;
2) In order to make No. 1 work, you have to have a game-plan. Like buying your ingredients for your food business venture among the other stuff which are exempted from GST. Basic necessities are exempted from GST and this will change accordingly or those you can claim-back. Hence, study the list and make sure you know which is which;
3) Lower down the cost of your operation. You can do this by doing a few cost effective measures of running an F&B business :
- Operate the business yourself. Don’t use too much labour. Especially foreign labour. Man the point-of-sale yourself, cook and serve every customer yourself (personal touch is always good) and if you can, do everything yourself;
- Run your business from a stall or half a shop. Get a place where the rent is cheap. If you still want make it a full-service F&B business, the patrons can stand or sit on high-chairs. These require smaller space;
- Sell from home. Run a delivery service or a pick-up service. Cakes baked at home and delivered to buyers are surprisingly good business. Packed-lunch business is also picking up in a huge way;
- A take-away only business like those goreng pisang or nasi lemak stall can be lucrative but still below the threshold;
- Cater to small groups of people with a certain target of RM to be collected each month. A cook with talent for certain types of food can command good money;
- Keep short hours for your F&B business. Foot traffic in most areas (even in malls) fill up only in short durations and not round the clock every day. Concentrate either for breakfast or lunch or dinner or combination of either two only, ideally those adjacent to each other;
- Cook and send to other places for you. There are not many nasi lemak bungkus on the tables of mamaks these days;
- Close the shop within a certain period of time each year when you are near your threshold for that year. Or set a target of RM500,000 per year revenue and the moment you achieve it, close your shop until the next year comes around. People in Europe do it. Maybe it is time for us to follow suit.
- Finally, albeit expensively, close your business everytime you have bypassed the threshold. Be forewarned, the Customs & Excise Department did warn that businesses which are trying this route may be found liable in trying to bypass GST.
*do refer to a tax consultant about all your GST inquiries before implementing these suggestions
Khairul Anuar Shaharudin, lawyer, is the author of Ask the Lawyer series including 40 More Questions You Should Ask Your Lawyer Before Buying A Residential Property in Malaysia and books under Fixi, Pinjam and Pentas (writing as Anuar Shah). Follow Khairul on Twitter @kruel74 and his blog Legal Cat-asthrophe