GST for Malaysian Gamers

As a seller, I think it's best I try to educate everyone what's happening beginning 1st April 2015 onwards in Malaysia. No, it's not the first time we have had an April Fool before, but the GST is a serious thing that sellers will have to implement. This might be a long post, but I'll try to be as brief as I can.

What happens after GST is implemented (Customer Level)?

The first thing that happens is that, most of the sellers will charge an extra 6% on top of their price. Now that is the general consensus. However, it should be noted that not all sellers will face this. As long as a retailer does not exceed over RM500,000 in revenue/sales annually, then we as sellers don't have to collect it. (Kyo is one of those guys)

If you're concerned about your favorite seller charging GST beginning 1st April 2015, you have the right to ask them if they are going to charge it or not. You don't have to ask how much your seller is making (in fact, it's actually offensive), but registered GST sellers should have a letter that shows that they are allowed to collect. If you happen to catch a seller who is charging GST, but is not authorised by law to do so, you have absolute power to call the authorities to complaint about them.

What happens to sellers after GST is implemented (Sellers level)?

As sellers, we are in an interesting position when it comes to how GST will affects us from our suppliers. To use me as an example, I will explain 2 scenarios on how it affects me and my pricing:

Scenario A: Kyo takes directly from the official game distributor

In scenario A, the official game distributor will import the game from overseas. For this, they will be incurred an Import Tax and a Sales Tax. In the past, both taxes are 20% in total. But, supposingly, if GST is implemented, then it would be 16% (elimination of Sales Tax's previous number). However, there have been rumors where it's not the case. So, brace yourselves for that.

In this scenario, Kyo will then order a game from the distributor. Here's an example of cost calculating:

RM120 (Game cost) x 1 unit x 6% = RM127.20 (this is Kyo's cost price, I will have to be smart in how to put out the profit for this kind of pricing from now on)

RM127.20 (Final Cost Price) + RM 12.80 (profit for Kyo) = RM 140 (Final Price from Kyo, where Kyo does not have to charge you another 6% GST)

Price before GST implementation: RM 132.80 (Cost price + Kyo's Profit)
Price after GST implementation: RM 140.00 (Jump in RM 7.20)

Supposingly, this is it. Once I have added the RM12.80 as the profit per copy of the game, then that's pretty much it. Again, I am not in a position to collect GST as I do not meet the requirements, so I don't have to take another 6% from you.

Scenario B: Kyo takes directly from the wholesaler (1 level under the Official Game Distributor)

Say for example that the Official Game Distributor no longer has the game, but my wholesaler does. Now this gets a little tricky.

Update 2: Thanks to our friend, Gary Lim who has clarified for me on some parts of my calculation. So I will be using his example instead and modifying the below post. (Update 1 is deleted since Gary has clarified this to me)

Wholesaler takes the game at the same cost price that Kyo pays:

RM120 (Game cost) x 1 unit x 6% = RM127.20 (this is the priced now charged to the supplier)

After this part, the wholesaler is only require to charge me the initial cost of the game (RM120) plus the profit they want (RM10). So in other words, here is how it should look like:

RM130 (which is the RM120 earlier plus RM10 profit) x 6% = RM137.80 (Final cost price that Kyo has to pay to the wholesaler)

So, where did the RM7.20 for GST went when the wholesaler paid it in the first place? They claim it from the government. Supposingly, this would mean that Kyo ultimately pays a little more GST while the supplier doesn't have to. Looking at the calculation, there is a discrepancy of 60 cents from the first GST charged to wholesaler. If you noticed, this 60 cents, is 6% from the RM10 profit that the wholesaler is making.

RM137.80 + RM12.80 (Constant Profit for Kyo) = RM150.60 (Final price that Kyo charges to Customers)

Price before GST Implementation: RM 142.80 (Cost price + wholesaler's profit + Profit for Kyo)
Price after GST Implementation: RM150.60

As you can see, because of an extra level, the price dramatically jumps from RM 120 to an extra RM 30.60 just because of GST and Profit calculations for both wholesaler and Kyo. Be reminded that again, since you're dealing with Kyo, I wouldn't implement the 6% because I don't need to.

These will be the scenario that Malaysian gamers will actually face from now on. I can say that:

- There aren't that many Official Game Distributors in Malaysia. Just 2 from what I remember.
- No matter what people say, the prices for games will go up. So, best to get what you can before the 31st of March.
- Sellers are doing the best they can to make things easier for everyone. Some of us may try to not report any of our earnings at all officially. But it could be the gravest mistake a seller would have ever made. Especially at this crucial hour.
- I am keeping my promise in not charging GST at all (For 2015 at least). In fact, I need to be very smart in not breaching the RM500,000 annual sales total. I was still faraway last year though.
- I am keeping a very close eye on sales this year because of the GST implementation. Lets pray I don't exceed RM500,000 and still have money to makan or else I'm screwed. Haha.
- I am however also ready to implement GST as my system has helped me to do so. But lets not worry about that since I intend to keep my promises.

So, what can sellers do to help ease the GST issue?

In 2009, I had a lovely visit to Australia and I was enjoying my stay of 2 weeks in Brisbane. I can't tell everyone enough how it felt like an amazing experience. One of it was actually how smart the Australians had priced their goods. When I looked at the receipt, the GST was priced in. Ever since I came back to Malaysia and learned a little more that GST was coming, i couldn't help but suggest that the best method to do this is to put the of the GST into it already and charge it as it is. Here's an example, and we'll take it from Scenario B earlier:

We assume that the seller now has to charge you 6% GST because he has to:

RM142.80(Price from Scenario B earlier) x 6% = RM151.37 (Final Price)

RM130 (Price from wholesaler) + RM20 (Profit for seller AND GST) = RM150
RM150 is already inclusive of 6% GST. So, putting away the GST, the actual retail price is RM141
In other words, customers save RM1.37 from earlier. The only problem is that, the sellers takes a small hit in profit for the customer's sake (Now the profit is RM 11 against the RM12.80 earlier).

At this rate, the RM1.37 can make a good difference while the seller's do their part as well to satisfy government requirements. This is however, a recommended move. Not every part of it is forced. It should also be noted that as a seller, we have absolute power to price things however we feel works. In fact, it is possible for sellers to charge games at a low price, even lower than the cost price, to help alleviate GST. (How they make a profit it however is another story)

Update: Thanks to Azali for clarifiying with me on the calculation again. Missed that part.

What about import sellers then? (for example Qisahn, Singaporean sellers)

Owh they are in the best position to invad... I mean help Malaysia. They don't have to charge you any GST at all. For starters, exporting a product doesn't require them to charge any GST to us (it's common for Singaporeans). And the only thing they have to do is just come across the border and send it to us by Poslaju. Sounds like the best option right?

Well, honestly, not quite. As of writing, I have no idea if the Customs of Malaysia will be beefed up to check and monitor all importation of items into the country. If it is beefed up, the country will be monitoring all game products coming from overseas. but, just remember that as long you don't exceed RM500 in the total price being declared when it gets sent over, you're fine. So, single copies of games will still avoid the GST.

Also, if you do import games from overseas and the local authorities catch you doing so (or Pos Malaysia does), then you will have to pay the 6%. But the word catch is very subjective.

So, in this post, I hope I have tried to educate everyone on how the pricing for games will feel like now on. It's not a nice picture to paint, but I feel it is necessary for everyone to understand the situation that a seller will have to face beginning 1st April 2015. If you have any question that you would like to ask in private, feel free to contact me at Facebook PM or at kyos.game.mart@gmail.com

PS: If you're a seller and you want to share this post to your customers, do let me know first so that I may properly give credit for your help. Thank you. :)

Credits to X Star Games for sharing the post as well. :)