MLM firms to be blacklisted for failing to pay GST

Products sold by MLM companies are not excluded from the consumption tax


Royal Malaysian Customs Department will blacklist direct-selling or multi-level marketing (MLM) businesses that fail to comply with the Goods and Services Tax (GST).

DG Datuk Seri Subromaniam Tholasy said products sold by MLM companies are not excluded from the consumption tax and these companies are subjected to the same laws related to the consumption tax.

“Of course they have to pay. If they do not, they will be blacklisted,” he told The Malaysian Reserve.

In July,  said 7,143 traders had failed to pay the GST and were therefore blacklisted and banned from travelling outside the country.

Section 49 of the GST Act 2014 states that the Customs and Excise DG can issue a notice to the Immigration director to ask that a person be

barred from leaving the country, if the DG believes the person will leave without paying taxes due.

Companies with annual revenues above RM500,000 must register with the Customs under the GST Act. Products and services listed under the act must be slapped with a 6% levy. The consumption tax collected must be channelled and reported to the Customs.

Without singling out any particular group, Subromaniam said his department is monitoring all organisations that must pay GST.

The department is expected to collect more than RM42 billion this year from the consumption tax first introduced in April 2015.

Past reports said Malaysia’s MLM business could be one of the largest in Asia, generating business worth RM8 billion in 2020. These MLM companies sell everything from hair colour, lipstick and make-up kits to nutritional products, laundry softener, detergent, jewellery and undergarments.

Products from direct-selling companies are popular among local consumers due to their uniqueness and unavailability of the items at traditional shops.

Lucrative commission for agents are helping MLM business to thrive in Malaysia. Traditionally, these agents are rewarded incentives or percentage for the sales they achieve.

Direct Selling Association of Malaysia (DSAM) ED Lawrence Cheah said 94 of the 300 direct-selling companies granted licences by the Domestic Trade, Cooperatives and Consumerism Ministry had registered with DSAM.

DSAM is presently the regulatory body monitoring direct-selling companies nationwide.

He said the low registrations number of direct-selling companies was due to the instruction for registrations which only started in November last year.

“We are confident that more of the 300 companies will register with us in the near future,” he said, adding that no deadline had been set for the remaining 206 companies to register.

Cheah said DSAM, as a regulatory body, ensures all members to comply with the regulations and laws including the GST.

“For those who are registered with us, they are subject to many things, including the Direct Sales Act 1993 and different codes of conduct for the protection of both the consumers and the distributors,” he said and declined to comment whether non-registered MLM companies evade from paying GST.