2. Standard GST Codes to create
Input Tax and Output Taxes
• Standard rated (Input & output)
• Zero rated (Input & Output)
• Exempt (Input & Output)
• Reverse charge (Input only)
• Blocked (Input only)
• Adjustment (Input & Output)
• Deemed supply (Output only)
• Not registered (Input only)
• Out of scope (Input only)
Account Codes
Balance sheet – Input tax payable & Output tax payable
P/L – GST tax expense
11/11/2015 Slide 2
3. Info need for completion of GST-03 return
5 Output Tax
a) Total value of Standard Rated Supply
b) Total output tax
6 Input Tax
a) Total value of Standard Rated Acquisition
b) Total Input Tax
7&8 Net amount payable or receivable
10 Total Value of Zero Rated Supplies
12 Total value of Exempt Supplies
16 Total Value of Capital Goods Acquired
17 Bad Debt Relief
18 Bad Debt Recovered
19 Breakdown Value of Output Tax by Industry Code & %
11/11/2015 Slide 3
Box No
4. Simple Scenario Double Entry
A simplified scenario of double entry
1 single invoice billed at standard rate & 1 single supplier invoice received
at standard rate
GST tax code = ISR (input standard rated), OSR (output standard rated). The
following would be our accounting entries
11/11/2015 Slide 4
Dr/Cr GST Code DR CR
Tot value of
SR supply
(GST03(5a))
Total
output
tax
(GST03(5b))
Tot value
of SR
acq'n
(GST03(6a))
Total
input tax
(GST03(6b))
Dr Customer X 1,060.00
Cr Sales OSR 1,000.00 1,000.00
Cr Output tax payable OSR 60.00 60.00
Being sale of goods
Dr Expense ISR 500.00 500.00
Dr Input tax recoverable ISR 30.00 30.00
Cr Supplier Y 530.00
Being purchase of materials
1,000.00 60.00 500.00 30.00
GST % 6.00% 6.00%
5. Net balance payable is RM30/-
We have until the end of the following month to complete GST -03
form and remit the balance to customs
11/11/2015 Slide 5
Simple Scenario Double Entry (cont)
At month end
Box 5(b) Total output tax = 60.00
Box 6(b) Total input tax = 30.00
Box 7, GST Amount Payable 30.00
6. Debit notes, Credit Notes
Debit notes & credit notes can only be used where there is a need to adjust
invoices issued.
In all other situations (billings for management fees, disbursements recovered
and other intercompany billings) these will have to be recorded as tax
invoices.
In the event that there is an adjustment required, the value of the CN or DN
issued against any amount invoiced by us will be included in the total value of
standard rated supply reported (GST 03 form box 5b), and the GST value of
these CN or DN will be included in the total output tax figure (GST 03 box 5a).
Tax code will also be the same as for output tax.
Please note that regardless of whether it is a Dr or a Cr against our value
invoiced, accounting and GST entries will be the same as the invoice itself.
Similarly a CN from supplier will follow original expense code & tax code as
was billed to us.
11/11/2015 Slide 6
7. DNs, CN’s continued
The following are the entries for DN/CN
11/11/2015 Slide 7
Dr/Cr GST Code DR CR
Tot value of
SR supply
(GST03(5a))
Total
output
tax
(GST03(5b))
Tot value
of SR
acq'n
(GST03(6a))
Total
input tax
(GST03(6b))
Dr Customer X 1,060.00
Cr Sales OSR 1,000.00 1,000.00
Cr Output tax payable OSR 60.00 60.00
Being sale of goods
Dr Sales OSR 10.00 (10.00)
Dr Output tax payable OSR 0.60 (0.60)
Cr Customer X 10.60
Being CN issued to Customer X
Dr Expense ISR 500.00 500.00
Dr Input tax recoverable ISR 30.00 30.00
Cr Supplier Y 530.00
Being purchase of materials
Dr Supplier Y 53.00
Cr Expense ISR 50.00 (50.00)
Cr Input tax recoverable ISR 3.00 (3.00)
Being CN issued by Supplier Y
990.00 59.40 450.00 27.00
GST % 6.00% 6.00%
8. Reimbursements and other invoices
Reimbursements
Moving forward, the use of DNs and CNs will be limited to only for adjusting any
invoices issued. Everything else will have to be raised via tax invoice.
This includes :
Interco billings (management fees etc)
On-charging of expenses (travelling, accommodation)
Misc sales
All these will need to be booked via raising of a tax invoice as prescribed by
Customs. GST will be charged and these billings will be added to total value of
standard rated supply except where the GST on the purchase was originally
blocked (eg on disposal of a car where input tax was originally blocked).
Disbursements
The only case where tax invoice will not be required would be where company is
paying on behalf of another company (eg Co A pays expense for Co B) and where
the invoice was issued in the other company’s (Co B) name. In the case, this would
not be added to taxable supplies
11/11/2015 Slide 8
9. Reimbursement
The following entries would be effected assuming a reimbursement
scenario with Co Z
11/11/2015 Slide 9
Dr/Cr GST Code DR CR
Tot value of
SR supply
(GST03(5a))
Total
output
tax
(GST03(5b))
Tot value
of SR
acq'n
(GST03(6a))
Total
input tax
(GST03(6b))
Dr Customer X 1,060.00
Cr Sales OSR 1,000.00 1,000.00
Cr Output tax payable OSR 60.00 60.00
Being sale of goods
Dr Recoverable ISR 500.00 500.00
Dr Input tax recoverable ISR 30.00 30.00
Cr Supplier Y 530.00
Being expenses incurred for recovery fm Co Z
Dr Company Z 530.00
Cr Recoverable OSR 500.00 500.00
Cr Output tax payable OSR 30.00 30.00
Being invoice rasied to Co Z for expenses
1,500.00 90.00 500.00 30.00
GST % 6.00% 6.00%
10. Disbursement
A “disbursement” is one where company pays on behalf of another company AND the invoice
is in that other company’s name. In this case, we would raise a DN and no GST would be
charged. The amount billed would not be added to standard rated acquisitions & no output
tax is collected
11/11/2015 Slide 10
Dr/Cr GSTCode DR CR
Tot value of
SR supply
(GST03(5a))
Total
output
tax
(GST03(5b))
Tot value
of SR
acq'n
(GST03(6a))
Total
input tax
(GST03(6b))
Dr Customer X 1,060.00
Cr Sales OSR 1,000.00 1,000.00
Cr Output tax payable OSR 60.00 60.00
Being sale of goods
Dr Recoverable 530.00
Cr Supplier Y 530.00
Being expenses on behalf for Co Z
Dr Company Z 530.00
Cr Recoverable 530.00
Being DN rasied to Co Z for recoveries
1,000.00 60.00 - -
GST% 6.00%Blank
11. Blocked input tax
Blocked input tax are for example GST on medical implements &
passenger car maintenance
Blocked acquisition is not reported in GST03 form but info will still need to
be maintained in the GL in the event of a GST audit.
To note : the GST exp will be absorbed under the same code as the original
expense item.
GST tax code = IBL (blocked), OSR (output standard rated)
11/11/2015 Slide 11
GST Code DR CR
Tot value of
SR supply
(GST03(5a))
Total
output
tax
(GST03(5b)) Expense
Dr Customer X 1,060.00
Cr Sales OSR 1,000.00 1,000.00
Cr Output tax payable OSR 60.00 60.00
Being sale of goods
Dr Expense IBL 500.00 500.00
Dr GST IBL 30.00 30.00
Cr Supplier Y 530.00
Being purchase of materials
1,000.00 60.00 530.00
GST % 6.00% 6.00%
12. Not claimable (new)
Budget 2016 has introduced the concept of GST which is not claimable for Income
Tax purposes.
“Any amount paid or to be paid in respect of GST as input tax by a person is not allowed as a deduction under
the new subsection 39(1)(o) of the ITA 1967 if – (ii) he is entitled to the input tax credit under GSTA but failed
to claim. “
This would include scenarios where we do not receive proper tax invoices, and we
have not been able to get these invoices. Eg Insurance on airfare, purchases above
RM500 where staff forgot to get proper tax invoice.
For this type of expense GST will be absorbed into a separate account (GST expense).
GST code INC (Input no claim)
11/11/2015 Slide 12
GST Code DR CR
Tot value of
SR supply
(GST03(5a))
Total
output
tax
(GST03(5b)) Expense
GST
expense
Dr Customer X 1,060.00
Cr Sales OSR 1,000.00 1,000.00
Cr Output tax payable OSR 60.00 60.00
Being sale of goods
Dr Expense INC 500.00 500.00
Dr GST INC 30.00 30.00
Cr Supplier Y 530.00
Being purchase of materials
1,000.00 60.00 500.00 30.00
GST % 6.00% 6.00%
13. Fixed Assets (new)
Fixed asset purchases need to be separately reported for GST purposes.
GST on most purchases (excluding blocked items) will be claimed as input tax as with
any standard acquisition. GST on blocked purchases will be added back to the cost
of the asset and will be an allowable expense in terms of capital allowances under
the ITA 1967.
CODA codes IFA (input fixed asset allowable) & IFB (input fixed asset blocked)
11/11/2015 Slide 13
GST Code DR CR
Tot value of
SR supply
(GST03(5a))
Total
output
tax
(GST03(5b))
Fixed
asset
(GST03(16))
Total
input tax
(GST03(6b))
Dr Customer X 1,060.00
Cr Sales OSR 1,000.00 1,000.00
Cr Output tax payable OSR 60.00 60.00
Being sale of goods
Dr Expense IFA 2,500.00 2,500.00
Dr GST IFA 150.00 150.00
Cr Supplier Y 2,650.00
Being purchase of laptop
Dr Expense IFA 100,000.00 100,000.00
Dr GST IBL 6,000.00 6,000.00
Cr Supplier Y 106,000.00
Being purchase of motor vehicle
1,000.00 60.00 108,500.00 150.00
GST % 6.00% 6.00% 6.00%
14. Reverse charge GST
Purchases of services (not goods) from outside of Malaysia would attract
reverse charge GST. Reverse charge would be imputed on the invoice
amount, and input & output tax would be created at the same time.
GST tax code = IRC (Reverse charge), OSR (output standard rated)
11/11/2015 Slide 14
GST Code DR CR
Tot value of
SR supply
(GST03(5a))
Total
output
tax
(GST03(5b))
Tot value
of SR
acq'n
(GST03(6a))
Total
input tax
(GST03(6b))
Dr Customer X 1,060.00
Cr Sales OSR 1,000.00 1,000.00
Cr Output tax payable OSR 60.00 60.00
Being sale of goods
Dr Expense IRC 500.00 500.00 500.00
Dr Reverse chg, Input rec'ble IRC 30.00 30.00
Cr Reverse chg, Output pyble IRC 30.00 30.00
Cr Supplier Y 500.00
Being purchase of svcs
1,500.00 90.00 500.00 30.00
GST % 6% 6%
Extra
15. From the example, in terms of double entry, the purchase is only
booked once. But in terms of analysis, the purchase is counted both as
a standard rated acquisition and a standard rated supply.
At month end
11/11/2015 Slide 15
Reverse charge GST(cont)
Box 5(b) Total output tax = 90.00
Box 6(b) Total input tax = 30.00
Box 7, GST Amount Payable 60.00
16. Deemed Supply
A deemed supply is one where the supply falls under the definition of
gift rule, or where free service has been provided between related
companies.
The gift rule states that where any single party (person or organisation)
receives any form of cash or goods in excess of RM500 (in a calendar
year) then this is considered a “gift” for GST purposes. Obvious
examples of gift rule would be donations to charity. However, we
should be mindful that staff benefits are defined under their letter of
employment or staff handbook to ensure that this is not caught under
the definition of a “gift” for GST purposes.
The GST requirement for a deemed supply is that a tax invoice has to
be raised and output tax deemed on the value of the supply.
In the case of donations where the purchase of the goods for donation
did not carry any input tax then there would be no need to deem an
output tax on this. Ie. there would be no deemed supply in this case.
11/11/2015 Slide 16
17. Deemed Supply (cont) (NEW)
Changes introduced in Budget 2016 are
“Any amount of output tax paid or to be paid under the GSTA which is
borne by a person who is registered or liable to be registered under
the GSTA is also not allowed as a deduction under the new subsection
39(1) of the ITA”
For our scenario this means that any donations/purchases of gifts for
events will now need to be expensed separately to the p/l as GST
expense not claimable. (CODA users no change in code just change at
back-end)
(Note to non CODA users – you can choose to maintain the GST amount
under “Donations” as it is not claimable in any case but you will need to
separately identify any other “gift” rule purchases which fall outside of
this code. Or you will need to analyse the GL for GST expenses before
finalizing of your tax.
11/11/2015 Slide 17
18. Deemed supply (cont)
DSS = deemed supply
The tax invoice will be raised for entry #3, to created the output tax. On the debit
side the GST will be expensed as this is a cost to us.
To facilitate the creation of the invoice, we will Dr & Cr the same expense code.
11/11/2015 Slide 18
GST Code DR CR
Tot value of
SR supply
(GST03(5a))
Total
output
tax
(GST03(5b))
Tot value
of SR
acq'n
(GST03(6a))
Total
input tax
(GST03(6b)) GST exp
Dr Customer X 1,060.00
Cr Sales OSR 1,000.00 1,000.00
Cr Output tax payable OSR 60.00 60.00
Being sale of goods
Dr Expense
(1)
ISR 500.00 500.00
Dr Input tax recoverable ISR 30.00 30.00
Cr Supplier Y 530.00
Being purchase of goods for charity
Dr Expense
(1)
500.00
Cr Expense
(1)(2)
DSS 500.00 500.00
Dr GST expense (P/L) DSS 30.00 30.00
Cr Deemed, output pay'ble DSS 30.00 30.00
Being deeming of GST for the above
1,500.00 90.00 500.00 30.00 30.00
Note (1) - Dr/Cr to same account - entry is to facilitate GST 6% 6%
(2) Raised as "Deemed supply invoice" for GST purposes
(3) If supplier is not GST registered then there is no need to deem a supply (ie these entries wont be required)
19. Exempt Supply
In the case of an exempt supply, all input tax incurred against this exempt
supply cannot be claimed. The input tax will therefore be expensed to the P/L
OER = Output exempt rated, IER = input exempt rated
For exempt suppliers the expense takes on the nature of the income. Even
though the purchases carry GST, the tax code has to reflect the exempt nature
(ISR) and no input tax is claimable.
11/11/2015 Slide 19
Dr/Cr GST Code DR CR
Tot value of
SR supply
(GST03(5a))
Total
output tax
(GST03(5b))
Total value
of exempt
rated
supply
(GST03(12)
Tot value
of
exempt
acq'n
GST exp
charged
to P/L
Dr Customer X 1,000.00
Cr Sales OER 1,000.00 1,000.00
Cr Output tax payable -
Being sale of goods
Dr Expense IER 500.00 500.00
Dr Input tax expense IER 30.00 30.00
Cr Supplier Y 530.00
Being purchase of materials (inclusive of GST)
- - 1,000.00 500.00 30.00
20. Bad Debts
Entitlement to bad debt relief where
a) Amount has been outstanding for more than 6 months AND
b) Sufficient effort has been made to recover the debt
Where there is bad debt relief the bad debt is added to SR acquisitions,
and tax as input tax, and where there is bad debt recovered the
recovery is added to SR supplies and tax as output tax.
11/11/2015 Slide 20
21. Dr/Cr GST Code DR CR
Tot value of
SR supply
(GST03(5a))
Total
output tax
(GST03(5b))
Total
value of
b/debt
recovered
(GST03(18))
Total
value of
b/debt
relief
(GST03(17))
Total
input tax
(GST03(6b))
Dr Customer X 1,060.00
Cr Sales OSR 1,000.00 1,000.00
Cr Output tax payable OSR 60.00 60.00
Being sale of goods
Dr Bad Debts w/o IBD 1,000.00 1,000.00
Dr Input tax recoverable IBD 60.00 60.00
Cr Prov for bad debts 1,060.00
Being prov for d/debt on unrecovered billings
Dr Cash 530.00
Cr Debtor 530.00
Dr Provision for bad debts 530.00
Dr Bad debts w/o OBD 500.00 500.00 -
Cr Out tax payable OBD 30.00 30.00
Being partial recovery of bad debt now written back
1,000.00 90.00 500.00 1,000.00 60.00
6% 6%
Final figure reported in GST 03 form 530.00 1,060.00
Bad Debts (cont)
11/11/2015 Slide 21
IBD = Input bad debt, OBD = output bad debt
Added together for net output tax %
Added with SR Acq’n for net input
tax %
22. Posting errors affecting GST
Normal posting errors are bound to happen.
Most accounting software are set up such that the GST portion needs to be
computed by the system thus eliminating some level of human error. For
example a purchase of RM1,000 value would need to be entered as
CR Supplier RM1,060
Dr Expense RM1,000 and GST code Standard rate (ISR)
The manual entry is not balanced and can only be balanced by generating the
tax. In this example, user clicks “generate tax” and system will create the line
Dr GST recoverable (B/S) RM60/-
The account code for GST recoverable is hard coded by GST code (ISR).
User will then need check and compare the GST computed and confirm entry
before posting, thereby building in computation check, and standard vs 0 /non
GST registered check
11/11/2015 Slide 22
23. Posting errors affecting GST (cont.)
Another control that can be built into the system is to limit the types of GST
codes to the document type. For example for suppliers invoice, only allow
input tax codes. For avoidance of doubt, it would be best to ensure there is a
clear differentiation between CN and DN’s issued by our supplier to us (allow
only input tax codes), and CN and DN’s issued by us (allow only output tax
codes).
In the event a wrong tax code is assigned but the entry is otherwise correct, if
error was discovered within the month, it is possible to cancel the entry and
re-post the correct entry. Alternatively, raise a journal, reversing the expense
line (with the wrong tax code) and re-post the expense line with the right tax
code.
In the event the error was discovered after submission of the tax returns, if
error does not affect info submitted in the GST03 form (none of the boxes 5 to
18), then journalize it & post it in the month the error was discovered.
In the event the error does affect the info submitted GST03 form please
highlight to management.
11/11/2015 Slide 23
