On 16th November 2022, the parliament of the Maldives passed the bill to increase the GST rates as a new revenue generation measure proposed in the Budget 2023.
The proposed GST reforms were effective with the ratification of 6th amendment brought to the Goods and Services Tax Act which includes the new rates of General Goods and Services Tax (GGST) and Tourism Goods and Services Tax (TGST) from 1st January 2023.
The businesses in Maldives registered for GST are strongly encouraged to commence preparations early for the impending GST rate changes to ensure a smooth transitional period between the rate changes.
Update your systems with new GST rate
Accounting and retail management systems implemented by most of the businesses will have features to change the tax rates, comply with record keeping obligations while mitigating the tax risks.
Businesses registered can communicate with their software implementors, IT vendors or in house IT teams and commence preparations early to update the accounting and invoicing systems, retail management systems, cash register and reservation systems to implement the GST rate changes from 1st January 2023.
As the update implementation process will require time and effort, it is advisable to approach your IT personnel at earliest to avoid non-compliance penalties.
All GST registered businesses must display prices inclusive of the new GST rate commencing from 1st January 2023.
Due to the expected challenges to ensure all the GST inclusive prices are updated overnight, Maldives Inland Revenue Authority (MIRA) allows businesses to display two prices.
- Prices inclusive of GGST at 6% applicable before 1 January 2023
- Prices inclusive of GGST at 8% with effect from 1 January 2023
- Prices inclusive of TGST at 12% applicable before 1 January 2023
- Prices inclusive of TGST at 16% with effect from 1 January 2023
Review contracts with customers
The existing contracts and arrangements between customers prior to the GST rate change can be reviewed to ensure that GST rate change is not excluded and has been considered within the terms and provisions of the contract
If the contract or the arrangement with client does not address GST rate changes, businesses may communicate with the customers and consult the inhouse lawyers or other legal professionals to update the contractual provisions.
Consumers are the vital stakeholders of GST as the burden of taxes are indirectly born by them and any increase in GST rates will be passed on them through increased prices.
Hence, it is vital for business to create awareness among customers regarding the new GST rates and increases prices of goods and services as a result of it. Especially, the tourist establishments and businesses operating in the tourism sector must create awareness of the increased prices of tourism goods and services to the tourists citing the changes brought to the GST regime of Maldives.
Businesses supplying the goods and services must ensure that all employees are trained to implement the changes between the revised GST rates and are ready for the difficulties which may be faced during the transitional period.
Rules for applying the correct GST rate to your supplies
GST must be charged at the new rates if the “time of supply” of a transaction occurs on or after 1 January 2023.
The “time of supply” determines the date on which the tax invoice for a supply is raised or the date on which payment for that supply is received, whichever is earlier.
The “cut off” times for business to implement the GST rate changes during the transitional period differs according to type of the business.
|Type of Business||Cut off Time|
|Businesses running on 24 hours basis||Must apply new rates from 00:00 hours on 01 January 2023|
|Businesses NOT running on 24 hours basis||Must apply new rates from the time of the opening of their business on the 01st January 2023|
For more information regarding the transitional period, please refer to the GST rate change fact sheet published by MIRA.