tax invoice and record keeping.pptx
DESCRIPTION
This slide about goods and services taxation.TRANSCRIPT
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TAX INVOICE & RECORD KEEPING
+PRESENTATION AGENDA
TAX INVOICE
CREDIT NOTE & DEBIT NOTE
RECORD KEEPING
ACCOUNTING BASIS
TAXABLE PERIOD
+TAX INVOICE
READING
GST Act Section 33 - Issuance of tax invoice
Section 34 - Production of tax invoices by computer
Every registered person, unless otherwise allowed by the Director General is required to issue a tax invoice when he makes taxable supply of goods or services.
In some cases, the Director General may allow the person to issue a simplified tax invoice or a self billed invoice.
In rare cases, the Director General may allow a registered person to issue a tax invoice if he is satisfied that it will not be appropriate for the registered person to issue a tax invoice.
Goods sold by auction or otherwise than by auction, such person selling the goods may issue document to be treated as a tax invoice.
+TAX INVOICE
What is a Tax Invoice ?A tax invoice is a document containing certain information about the supply that has been made and it is similar to a commercial invoice except for some additional information such as details of registered person and supply, GST rate and the amount of GST payable.
Importance of a tax invoice :
May trigger the time of supply for a transaction
Primary evidence to support a customer’s input tax claim
Determine when he may claim his input tax
Determine which supplies made by him should be included in a particular taxable period.
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Issuance of Tax Invoice
Tax invoice shall be issued : by every registered person Who makes any taxable supply In the course of furtherance of any business In Malaysia
Shall contact prescribed particulars
Commits an offence if registered person : Fails to isssue a tax invoice ; or Issue a tax invoice which does not contain any of the
prescribed particulars
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Issuance of Tax Invoice
For the purpose of GST, a tax invoice :
May be issued within 21 days from the basic time of supply
Must be issued by a registered person and the original copy to be retained by the customer.
May be issued electronically or in printed form
Must be in Ringgit Malaysia
Must be certified true copy if tax invoice is lost or misplaced
Marked with the word “void” (cancel) if information is wrong.
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Issuance of Tax Invoice Tax shall not be charged (i.e. showing tax amount) in the
- invoice which is issued on : Non-taxable supply Zero rated supply Supply by non registered person
Any person who fails to comply,, commits an offence and shall,
on conviction, be liable to : a fine not exceeding thirty thousand ringgit or to imprisonment for a term not exceeding two years or to both and a penalty of two times the amount of tax.
+TAX INVOICE
Non Issuance of Tax Invoice
Tax Invoice is not required to be issued by a registered person on: Zero rated supply
Supply without consideration on which tax is charged
+TAX INVOICENon Issuance of Tax Invoice ( cont….)
Tax invoice shall not be issued on: Any supply of second-hand goods (margin scheme/Sec 59)
Any supply of imported services
Any supply of treated or proceeds goods which is deemed to have been supplied by the recipient under approved toll manufacturer scheme (ATMS)
Commits an offence if fails to comply
+TAX INVOICE
Tax Fraction :
Tax fraction is the GST amount of the consideration. The calculation of the tax fraction is as follows :
Tax fraction = tax rate x amount of consideration 100% + tax rate
Example: Assuming your consideration is RM100.
GST = GST rate x amount of consideration 100% + GST rate
= 6% x RM100 100% + 6%
= RM5.66
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Tax Inclusive
In retail business , it may be more practical to treat the sum of money received from your customer ( consideration) as inclusive of GST
The tax invoice should still show the GST as a separate amount, and you can state the GST inclusive prices and indicate with the words “price inclusive of GST”.
Example :
Assume you sell an oven at RM1050
GST 6% = Price x Tax Fraction
= RM1050 x 6/106
= RM59.43
Charge customer RM 1050 and remit RM59.43 to customs.
+TAX INVOICE
Tax Exclusive
Tax exclusive refers to the amount of GST paid as shown in the tax invoice with separate GST amount.
Example :
Assume you sell an oven at RM1050
GST 6% = Price x Rate of Tax
= RM1050 x 6%
= RM63.00
Charge customer RM 1050 and + RM63.00 (GST) = RM 1,113.00 and
remit RM 63.00 to Customs.
+TAX INVOICE
Type of Tax Invoice
The issuance of tax invoices can be classified as follows:
Tax Invoice : Full tax invoice Simplified tax invoice
Deemed Tax Invoice : Self-billed invoice Invoice or statement of sales by auctioneer
+TAX INVOICEFull Tax InvoiceA full tax invoice should have the following particulars:
a) The words “tax invoice” in a prominent place;
b) The tax invoice serial number;
c) The data of issue of the tax invoice;
d) Name of supplier, address and identification number of the supplier;
e) The customer’s name ( or trading name ) and address;
f) A description sufficient to identify the goods or services supplied;
+TAX INVOICEParticulars of a full tax invoice (cont………….)
g) For each description, distinguish the type of supply for zero rate, standard rate and exempt, the quantity of the goods or the extent of the services supplied and the amount payable, excluding tax;
h) Any discount offered;
i) The total amount payable excluding tax, the rate of tax and the total tax chargeable to be shown separately;
j) The total amount payable inclusive of the total tax chargeable; and
k) Any amount referred to in (i) and (ii) must be expressed in Ringgit
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Simplified Tax Invoice
The Director General may allow some registered persons to issue simplified tax invoice in their business transactions.
This type of invoice is used by retailers who normally generate large volume of invoices daily to end consumers e.g. supermarkets, eateries, petrol kiosks and other point of sales outlets.
Can be issued regardless of any value of sales.
Can take the form of an invoices, receipts, voucher or any other similar document, as long as it has all the particulars approved by the Director General.
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Simplified Tax Invoice
A taxable person is required to apply in writing to the Director General if certain prescribed particulars are to be omitted in the tax invoice issued by him
For example, a registered person applies to the DG to allow him to exclude in his tax invoice, the following prescribed particulars:
The words “tax invoice”;
The name and address of the recipient; and
The price and tax for each item to be shown separately
This simplified invoice may be allowed to be issued provided it contains particulars as approved by DG
Example of such simplified invoice with the approved particulars is as follows :
+TAX INVOICE
Particulars of Simplified Tax Invoice as approved:a) The name, address, and identification number of supplier;
b) The date of issuance of the invoice;
c) The tax invoice serial number;
d) A description sufficient to identify the goods or services supplied;
e) For each description, distinguish the type of supply for zero rate, standard rate and exempt, the quantity of the goods or the extent of the services supplied and the amount payable, including tax;
f) The total amount payable inclusive of total tax chargeable;
g) The rate of tax and the amount of tax chargeable; and
h) Any discount offered.
+TAX INVOICE
+TAX INVOICECash Register Rolls / Point of Sales Receipt Rolls If you buy goods from a wholesaler / retailer who is a GST registered
person, the receipt given to you can be considered as a simplified tax invoice.
This receipt can be used to claim input tax if you are a registered person as long as it contains the particulars approved by the Director General: Example :
Supplier’s name and address; GST identification number; Date and serialized receipt number; description sufficient to identify the goods supplied Quantity and price for each line amount payable inclusive of tax; and Total amount of GST charged.
+TAX INVOICE
Other Document as a Tax Invoice
In rare cases, the Director General may allow a registered person to use a document to be treated as a tax invoice
Registered person must apply in writing
Director General is satisfied that it will not be appropriate for the registered person to issue a tax invoice.
Example :
Bank statement can be treated as a tax invoice, as it is not practical for the banks to issue a tax invoice due to the large volume of transactions.
+TAX INVOICE
Simplified Tax Invoice and Input Tax Claim
Simplified tax invoice can be used to claim any amount of input tax
- credit provided it contains the name and address of the recipient
Simplified tax invoice which does not have the same and address
of the recipient :
The maximum of input tax to be claimed must not exceed RM 30.00.
If the amount of GST payable is more than RM 30.00, the recipient can only claim input tax RM 30.00
Recipient must request to include his name and address in the simplified tax invoice to enable him to claim the full amount of input tax if GST payable is more than RM30.00.
+TAX INVOICE
Tax invoice for Mixed Supplies
A supplier may make exempt, zero-rated and or standard rated supplies simultaneously to the same customer
Issues one invoice to document such transactions
The tax invoice issued must clearly distinguish the taxability of the
supplies (exempt, zero-rated or standard rated) made
Indicate separately the applicable values and the GST rate charged
(if any) on each supply.
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+TAX INVOICE
+TAX INVOICE
Self-Billed Invoice
Self-billed invoice allows the recipient to issue a tax invoice to himself in respect of a supply of goods or services to him by the supplier.
Application for self-billing to be made by recipient to the director General for such invoice to be treated as a tax invoice if :
The value at the time of supply is not known by the supplier;
The recipient and the supplier are both registered persons;
The recipient and supplier agree in writing to a self-billed invoice; and
The supplier and the recipient agree that the supplier shall not issue a tax invoice.
+TAX INVOICE
Who Can Issue Self-Billed Invoice?
Examples:
Tobacco manufacturers issue tax invoices to growers who supply tobacco leaves. Since the recipient / buyer knows the open market value of the tobacco leaves, thus they are best able to provide the necessary information on the value of the product and will therefore issue a self-billed invoice or recipient-created tax invoice.
A publisher can adopt a self billing arrangement when playing royalties to taxable authors
Felcra, Felda, Palm oil industry, BAT, Supermarkets, etc..
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Self-billed invoice issued by recipient should have the following prescribed particulars:
a. The supplier’s &recipient’s name, addresses & identification numbers;
b. The word ‘self-billed invoice’ in a prominent place;
c. The invoice serial number;
d. The date of issuance of the invoice;
e. The reference number of Director General’s approval;
f. A description sufficient to identify the goods or services supplied;
g. For each description, distinguish the type of supply for zero rate, standard rate and exempt, the quantity of the goods or extent of the services supplied and the amount payable, excluding tax;
h. Any discounts offered;
i. The total amount payable excluding tax, the rate of tax and the total tax chargeable to be shown separately;
j. The total amount payable inclusive of the total tax chargeable; and
k. Any amount referred to in (i) & (j) must be expessed in Ringgit.
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DG may allow the recipient to issue a self-billed invoice subject to the following conditions :-
1. The recipient is allowed to isuue self-billed invoices in respect of the supplier’s supplies for a period which shall not be later than –
i. the expiry of a period of twelve month , or
ii. the expiry of the period of the contracts between the recipient and supplier for the supply of goods and service to which the self-billing agreement relates ;
2. A copy of any self-billed invoice is to be provided to the supplier and a copy is to be retained by the recipient:
3. In the case where the self-billed invoice is issued before the time of supply of goods, the self- billed invoice shall be issued with payment; and
4. The supplier and recipient shall notify each other if either one of them ceases to be register for GST, transfer his business as a going concern or becomes registered under a new identification number.
+TAX INVOICE
Self-Billed Invoice
Commits an offence if recipient: Issues a self-billed invoice without the approval of the Director
General;
Issues a self-billed invoice which does not contain any of the prscribed particulars; or
Fails to comply with any condition as prescribed.
+TAX INVOICE
Document Issued By Auctioneer – Deemed Tax Invoice
Supplies made by auctioneer acting in his own name are regarded as supplies made by the principal/owner of the goods
If principal is a taxable person, the auctioneer whether or not he is a taxable person shall be liable to account for output tax on goods auctioned on the principal’s behalf
+TAX INVOICE
Document Issued By Auctioneer – Deemed Tax Invoice
Statement of sale/invoice to be issued to buyer of auctioned goods : If the principal owner is a taxable person The auctioneer is or is not a GST registered person
Auctioneer is allowed to issue a statement of sale or invoice in his own name
To be regarded as tax invoice based on the tax inclusive principle
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Document Issued By Auctioneer – Deemed Tax Invoice
The statement of sale or invoice issued by auctioneer should contain the following prescribed particulars :
a) Auctioneer’s name , address and business registration number;
b) The name and address of the buyer
c) The date of issues;
d) The invoice serial number;
e) A description sufficient to identify the goods and quantify the goods sold
f) The total amount payable inclusive of GST
g) Rate of tax
h) Total tax chargeable; and
i) To word “ Price Payable Inclusive of GST”
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+TAX INVOICE
Document Issued By Auctioneer
Commits an offence if any auctioneer or person selling auctioned goods fails to issue a document or issues a document without the prescribed particulars of the tax chargeable to the buyer.
+TAX INVOICE
Tax Invoices Issued by Agents (seller) on behalf of a principal
The principal is the seller and not the agent.
If the principal is a registered person, the agent may issue a tax invoice including credit/debit notes with the principal’s details.
The principal remains liable for accounting tax.
If the agent is a registered person, he must issue a tax invoice to claim the commission from the principal for his services as a selling agent.
The agent is liable for accounting of tax on agency’s commission.
+TAX INVOICE
Tax Invoice received by Agents (buyer) on behalf of a principal
The principal is the buyer and not the agent.
If the supplier is a registered person, he may issue a tax invoice to the agent or principal and show the principal’s details.
The supplier is liable for accounting of tax
If the agent is a registered person, he must issue a tax invoice to claim the commission from the principal for his services as a buying agent.
The agent is liable for accounting of tax on agency’s commission.
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Tax Invoice Issued by Agents (seller/buyer) in his own name
In the case of agent who buys or sell goods and services in his own name, he is the buyer or the seller.
If the agent is a registered person, he must issue a tax invoice in his own name and be liable to account for GST.
Agents must keep a complete record of the name, address and GST number of their principals in any transaction.
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Invoice in Foreign Currency :
If the amount of the supply stated in a tax invoice is in foreign currency, the following particulars in the tax invoice have to be converted into Ringgit Malaysia (RM) for GST purposes:
a. The amount payable before GST
b. The total GST chargeable; and
c. The total amount payable (including GST)
The foreign currency is converted into Ringgit Malaysia by using the open market rate of exchange prevailing in Malaysia at the time when the supply takes place.
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Tax Invoice and Supply Given Relief
Minister may grant relief to any person or class of persons from the payment of the whole or any part of the tax on any taxable supply of goods or services or any importation of goods.
A taxable person shall be relieved from charging and collecting GST on taxable supplies made to such person or class of erson;
GST should not be charged ; and
The tax invoice issued to such person shall state the clause:
Relieved from charging GST for supply to a person given relief under
item….schedule…of GST (Relief) Order 201X
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+TAX INVOICE
Pro Forma Invoice
A pro forma invoice is not regarded as a tax invoice
You can only claim input tax in your GST return if you have a proper tax invoice
Your supplier should give you a proper tax invoice for claiming input tax.
+TAX INVOICE
Duplicate copy of tax invoice
You should issue one (1) original tax invoice for each transaction. If your customer request for a duplicate copy, may be due to damaged or lost tax invoice, then you may issue to him a copy marked “COPY ONLY” to enable the recipient to claim his input tax.
+TAX INVOICE Important of Goods & Services
GST for imported goods are declared and paid at the time of importation whereas GST on important services (Sec. 13) is accounted by way of the reverse charge mechanism.
Reverse charge mechanism
A supplier who does not belong in Malaysia and supplies services to a customer in Malaysia does not have to charge GST. However, the customer who receives the services is required to account for GST by a reverse charge mechanism.
The recipient has to pay tax for the imported services ha received and the same time claim input tax in his GST return. Reverse charge mechanism is an accounting procedure where a recipient ( as the customer ) of the supply., act as both , the supplier and the recipient of the services.
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Tax Invoice and Imported Goods
The recipient of imported goods does not hold a tax invoice for the imported goods. GST is paid at the time of importation based on the invoice from the overseas supplier using customs declaration forms (Customs Form No. 1 and 9). These declaration forms will be sufficient for the purpose of input tax claim by the importer or buyer.
Tax Invoice and Imported Services
The recipient of imported services does not hold a tax invoice for the imported services . If the importer of the services is a registered person, the imported services is treated as a supply made by the recipient and he has to account for GST in the GST return covering the taxable periods in which the imported services were paid.
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Production of tax invoice by computer
A registered person shall be treated as having issued a tax invoice to another person even though there is no delivery of any equivalent document in paper form to the person if the requisite particulars are recorded in a computer and are :
a) Transmitted or made available to the person by electronic means (including emails, facsimiles etc) ; or
b) Produced on any material other than paper and is delivered to the person.
If tax invoices, receipts, credit or debit notes are issued electronically, these documents should be readily accessible and convertible into writing.
+TAX INVOICE
The requirement for issuance of electronic documents are:
a) The intended recipients must confirm in writing that they are prepared to accept electronic documents under conditions set out.
b) Both the supplier and recipient of the supply must retain the documents in readable and encrypted form for a period of 7 years from the date of supply
c) Must also have access to the necessary codes or other means available to enable customs auditors to compare the documents in readable form with those in encrypted form.
d) For tax invoices, receipts, credit or debit notes that are issued manually and is subsequently converted into an electronic form, these documents should be retained in its original form prior to the conversion.
+TAX INVOICE The requirement for issuance of electronic documents (cont…..):
e) Taxable person must establish controls to ensure the electronic tax invoices cannot be manipulated before and during transmission.
f) Taxable person should not issue tax invoices in paper form to customers whom you already issued electronic tax invoices.
(In the event that you need to issue the tax invoices in paper form, you must take the necessary measures to prevent double claiming of input tax by your customers e.g. invalidate either the paper form or electronic form or electronic form of the tax invoices issued).
g. The taxable person should print and keep a hard copy of the electronic tax invoices issued if he does not intend to store the tax invoices in electronic media.
+TAX INVOICE Flat Rate Scheme (FRS)
FRS is a scheme that allows any person who is not liable to be registered and is carrying on a business involving the prescribed activities such as crop production, livestock and fishery to recover the embedded GST on their purchases.
Under FRS :
Approved person shall issue an invoice and charge a prescribed flat rate addition in the consideration for any supply of taxable goods to GST registered person (buyers)
Approved person is not allowed to claim ITC
Buyers (registered persons) can claim ITC based on flat rate addition incurred
Approved person need not submit returns nor remit flat rate addition collected to customs.
Approved person must submit annual sales statement or when directed by Director General.
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Invoice for FRS
An approved person shall only issue an invoice with a flat rate addition for any supply of taxable goods to GST registered person with respect to the prescribed activities of his business. Invoice issued under the scheme should have the following particulars:
a) The name , address and references number of the approved person;
b) The date of issuances;
c) invoice serial number;
d) The name , address and GST number of the registered person to whom the goods are supplied;
e) The description of the goods supplied
f) The total amount payable excluding flat rate addition, the rate of flat rate addition and the total amount of flat rate addition to be shown separately; and
g) The total amount payable inclusive of flat rate addition.
+TAX INVOICE Invoices for FRS
An approved person who fails to issue an invoice on the taxable supply of goods made by him from the prescribed activities to the registered person commits an offence and shall, on conviction, be liable to : A fine not exceeding fifteen thousand ringgit or Imprisonment for a term not exceeding two years or To both; and To a penalty of the amount of prescribed flat rate addition so shown
Any person other than an approved person who issues an invoices showing an amount as being the prescribed flat rate addition commits an offence and shall, on conviction, be liable to : A fine not exceeding fifteen thousand ringgit or Imprisonment for a term not exceeding two years or To both; and To a penalty of the amount of prescribed flat rate addition so shown
+TAX INVOICE
+TAX INVOICE Invoice for FRS (Issued by recipient)
Recipient may be allowed to issue an invoice in relation to a supply made by the approved person under FRS.
Application to be made by the recipient (registered person) subject to the following conditions:
a) The value is not known by the approved person at the time of supply;
b) The registered person and the approved person agree in writing that the approved person shall not issue an invoice in respect of any supply made under this scheme;
c) The registered person shall issue an invoice showing particulars of a FRS invoice;
d) A copy of the invoice is provided to the approved person and another copy is retained by the registered person;
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Invoice for FRS (Issued by recipient)cont….
e. The approved person shall notify the registered person if he ceases business, transfer his business as a going concern or becomes a registered person;
f. In the case where the invoice is issued before supply is made, the invoice shall be issued with payments; and
g. Any other conditions as the Director General deems fit to impose.
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GST Group Registration
Invoice for GST Group:
Individual member making supplies to recipients outside the group must issue tax invoices stating their own GST identification number.
Tax invoice to be issued in the name of individual members for acquisition from suppliers outside the group.
Supplies or transaction between members of the GST group are disregarded. They may issue normal invoices.
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Practical Exercise
1. Can a registered person issue a tax invoice?2. Under what two situations a registered person can choose not
to issue a tax invoice?3. What is the tax fraction if the rate of tax is 6%?4. A TV in a registered persons shop is priced at RM3000. What
is the GST amount if the price is inclusive of tax?5. What is the amount of tax if the value of supply is RM100, and
the tax rate is 6%?6. Why is the tax invoice considered a very important document
for GST purposes?7. Who can issue a simplified tax invoice?8. What is self-billed invoice?9. Can air ticket be used as a valid tax invoice?10.Can you issue a tax invoice for the following supplies?
- A zero rate supply- An exempt supply- Deemed supply- Imported services
+CREDIT AND DEBIT NOTE
READING
GST ActSection 35 – credit note and debit note
Credit and Debit Note
Credit note is issued when the amount previously invoiced is reduced or a transaction is cancelled.
Debit note is issued when the amount previously invoiced is increased for the same supply.
To allow trader to make necessary GST adjustment in the account to show the actual GST liability in his return.
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GST Act Section 35 – credit note and debit note
Sec 35 – Where any taxable supply is made by or to any registered person which involves the issuance and receipt of credit note or debit note under the prescribed circumstances and conditions, the registered person, whether he is the supplier or recipient of the taxable supply , shall make adjustment in his returns accordingly and the credit note and debit note shall contain the prescribed particulars.
+CREDIT AND DEBIT NOTE
ISSUANCE OF CREDIT NOTE AND DEBIT NOTE
A change in the consideration for a supply due to :
A change in the rate of tax or a change in the description of the supply (from standard-rate to zero-rated/exempt supply); or
Any adjustment in the course of business (cancellation, under or over-stated GST amount, etc….)
+CREDIT AND DEBIT NOTECredit Note (due to change in legislation)
A change in the rate of tax Example – standard rate to zero rate/exempt
A change in the description (tax charged on that supply is incorrect)
A credit note should be issued and adjustment to be made under the following situation: A tax invoice in relation to the supply has been issued A return for the supply has been submitted to the DG.
Taxable person shall:
Make an adjustment in the return for the taxable period where the change in rate or description takes place
Suppliers reduce output tax for the corresponding amount stated in the credit note
Recipient reduces input tax
+CREDIT AND DEBIT NOTECredit Note (due to adjustment in the course of business)
Adjustment in the course of business :
When the goods invoices as standard—rated should have been exempt or zero—rated;
The supply of goods or services is cancelled;
Consideration for the goods have been partly or fully waived;
Quantity discount given after the goods have been supplied;
When sub—standard goods are accepted by the customer at a reduced price;
Goods are returned or services are not accepted; or
Goods and services are supplied for an unconfirmed consideration
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Credit Note (due to adjustment in the course of business)
A credit note should be issued and adjustment to be made under the following situation: A tax invoice in relation to the supply has been issued A return for the supply has been submitted to the DG.
Taxable person shall:
Make an adjustment in the return for the taxable period in which the credit note or is issued or receive.
Suppliers reduce output tax for the corresponding amount stated in the credit note
Recipient reduces input tax
+CREDIT AND DEBIT NOTEExample – Credit Note’s Adjustment:Goods sold on 20/7/15 by company A to company B, amount RM1000 plus GST 6%.Goods return on 10/8/15 to company A, amount RM208. Credit note issued on25/8/15 by company A. Company A (seller)Jul 2015 (return)Output tax : RM1000 x 6% = RM60Aug 2015 (Adjustment in Return)Decrease Output Tax : RM208 X 6/106 = RM11.77Company B (buyer)Jul 2015 (return)Input tax : RM1000 x 6% = RM60Aug 2015 (Adjustment in Return)Decrease Input Tax : RM208 X 6/106 = RM11.77
*Monthly taxable period
Output Tax
Input Tax
Adjust by declaring the related output & input in form GST 03.
+CREDIT AND DEBIT NOTEDebit Note (due to change in legislation)
A change in the rate of tax Example –zero rate/exempt to standard rate
A change in the description (tax charged on that supply is incorrect)
A debit note should be issued and adjustment to be made under the following situation: A tax invoice in relation to the supply has been issued A return for the supply has been submitted to the DG.
Taxable person shall:
Make an adjustment in the return for the taxable period where the change in rate or description occurs
Suppliers increases output tax for the corresponding amount stated in the debit note
Recipient increase input tax
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Debit Note (due to adjustment in the course of business)
Adjustment in the course of business :
When the goods invoices as zero—rated should have been standard—rated ;
Additional charge such as transportation cost imposed after delivery of goods;
When goods delivered to the customer are under-priced;
Over supply of goods or services to the customer; or
Goods and services are supplied for an unconfirmed consideration
+CREDIT AND DEBIT NOTEDebit Note (due to adjustment in the course of business)
A debit note should be issued and adjustment to be made under the following situation: A tax invoice in relation to the supply has been issued A return for the supply has been submitted to the DG.
Taxable person shall:
Make an adjustment in the return for the taxable period in which the debit note or is issued or receive.
Supplier increases output tax for the corresponding amount stated in the debit note
Recipient increases input tax
+CREDIT AND DEBIT NOTEExample – Credit Note’s Adjustment:
On 20/10/15, ABC Ent. Issued a tax invoice to Maju Sdn.Bhd for RM10,600 inclusive GST 6%.
In October taxable period for that particular transportation:
ABC Ent. accounts output tax of RM600 [i.e RM10600 x (6/106)]
Maju Sdn.Bhd claim an input tax of RM600 [i.e RM10600 x (6/106)]
On 10/11/15, ABC Ent. Raised a debit note for the amount of RM1060 inclusive GST 6%.
In November taxable period,
ABC Ent. has to make an adjustment by increasing the output tax of RM60 [i.e RM1060 x (6/106)]
Maju Sdn.Bhd has to make an adjustment by increasing the input tax of RM60 [i.e RM1060 x (6/106)]
+CREDIT AND DEBIT NOTE
A credit note or debit note shall contain the following prescribed particulars:
a) The words “credit note” or “debit note” in a prominent place;
b) The serial number and date of issue;
c) The name and address of the person to whom the goods or services are supplied;
d) The reason for its issue;
e) A description which identifies the supply of goods or services;
f) The quantity and amount for each supply;
g) The total amount excluding tax;
h) The total amount excluding tax;
i) The rate and amount of tax; and
j) The number and date of the original tax invoice.
+CREDIT AND DEBIT NOTE
The words “credit note” clearly indicated
Description of goods or services
Supplier’s name, address and GST
identification number
The name and address of the person to whom the goods or services
are supplied
The reason for its issue
The quantity and amount for each
supply
The total amount excluding tax
The rate and amount of tax
The serial number and date of issue
The number and date of the original tax
invoice
+CREDIT AND DEBIT NOTE
The words “debit note” clearly indicated
Description of goods or services
Supplier’s name, address and GST
identification number
The name and address of the person to whom the goods or services
are supplied
The reason for its issue
The quantity and amount for each
supply
The total amount excluding tax
The rate and amount of tax
The serial number and date of issue
The number and date of the original tax
invoice
+CREDIT AND DEBIT NOTE
How To Record Credits From Suppliers?
You must keep a record of all credits notes received from your suppliers.
If you normally issue debit notes to suppliers from whom credit is due and adjust your records at the stage, the debit notes must show details similar to those required for credit notes, i.e the credit notes from the suppliers must match with the debit notes issued by you for the same supply.
If do not match, we use credit note from the supplier as a valid document for adjustment purpose.
You should ensure that adjustment are made only once and that the credit and debit notes are not used simultaneously as accounting documents.
+CREDIT AND DEBIT NOTE
Practical Exercise
1. A services provider supplies services over and above the invoiced amount.• What kind of documents does he need to issue?
• How does have to account for the additional charge for the over-supplied services?
2. A trader sells 1,000 units of the key chains and charges RM1,000 (inclusive of tax 6%) for the sale of the key chain. His customer subsequently returns 100 units of defective key chains. How does the trader make his adjustment?
3. What document is to be issued when the trader receives rejected goods?
4. If you charge your customer RM1,060 (inclusive of tax 6%) and if he returns half of the goods because it is defective.• What is the value of the credit note that you should issue?• What is the amount of GST you have to make adjustment?
5. Services provided on 24.1.16 by company A to B, amount RM1,000. Additional charge for services over supplied to company B, amount RM100. Debit more issued on 25.2.16 by company A. What adjustment does company B make?
+RECORD KEEPING
READING
GST ActSection 36 – Duty to keep record
Record Keeping
Section 36 of the GST Act 20XX requires both taxable and certain non taxable person to keep full and true records of all transactions which affect or may affect their tax liabilities.
These records should be kept in Malaysia except as otherwise approved by the Director General and shall be in the national or English language, and
Should be preserved for a period of seven years from the latest date to which the records relate.
+RECORD KEEPINGRecord Keeping – Who and Why?
all taxable persons should keep accounting documents and records of all business supplies and acquisitions.
To enable GST auditors to establish the nature, time and value of all taxable supplies and importation of goods and services.
To reconcile accounting records with the GST returns submitted.
Details of any exempt supplies and any method of apportionment used should also be available.
+RECORD KEEPING
Record Keeping – Who and Why
Certain non taxable persons are also required to keep documents and records
Non taxable person???
Any person who has ceased to be taxable person and has made/may make bad debt relief claim/repayment of bad debt relief
Imported services supplied to a recipient (who is a non taxable person) for the purposes of business
Goods of taxable person are sold by a non taxable person to recover any debt owed by the taxable person.
Supply by auctioneer (a non taxable person) in his own name on behalf of the principal/owner of the goods ( a taxable person )
A non taxable person in Malaysia, who receives goods (in the course or furtherance of business ) from an approved toll manufacturer.
+RECORD KEEPING
Failure to Keep Records
Any person who contravenes Section 36 GST Act 201X, commits an offence and shall on conviction be liable to a fine :
Not exceeding fifty thousand ringgit or
To imprisonment for a term not exceeding three years
Or to both
+RECORD KEEPINGWhat are Records?
Records are documents which include all books of account or relevant computer print-outs if a computer is used, as well as supporting documents. If the record is in an electronically readable form, a manual to the software must be available.
Records may include :
a) All records of goods or services supplied by or to that taxable person including tax invoices, invoices, receipts, credit note, debit note and import-export declaration forms;
b) All records of importations of goods;
c) Physical books of account, financial statement and documents including computer printouts of business and accounting record;
d) Electronic records; and
e) All details of the accounting system, including charts, codes of accounts, instruction manuals, system and program documentation and specification, etc.
+RECORD KEEPINGCategory of preserving records
Physical records – hard copy
Electronic records – soft copy
Types of Records
Records relating to registration SSM records – form D, 9, 24, 49 and etc
Record relating to business activities Tax invoices, invoices, receipts Debit note, credit note Delivery order, purchase order Bank slip, bank statement, voucher and etc Contract, agreement
Records relating to accounting (hard copy) Fianancial Statement – Profit & Loss, Balance Sheet, Trial Balance Account Payable, account receivable, general ledger, sales, purchase, stock, cash and etc.
+RECORD KEEPINGTypes of Records (cont…)
Record relating to taxation Customs forms – K1, K2, K9 and etc GST – GST return, registration and etc Income tax declaration
Records relating to electronic form Accounting software manual Accounts chart, access code, program documentation Audit trail Purchase, sales, GL listing (e.g standard, exempt,, disregard, out of scope,
deemed supply etc) GAF File (GST Accounting software) Management Information report (MIS) report Other data / records kept in accounting / business software
+RECORD KEEPING Other records
a) Business goods which were put to non – business use;
b) Disposal of business goods, whether or not for a consideration;
c) Gifts to customers in the course or furtherance of business;
d) Samples given to potential customers in the course or furtherance of business;
e) Fringe benefits given to employees; and
f) Movement of imported goods to / from Licensed Warehouse
+RECORD KEEPINGSST records keeping after GST are?
For those formerly registered under the Sales Tax Act 1972 and Service Tax Act 1975, records for GST purposes must be kept separately from sales tax and services tax.
Separate the records due to the different act of implementation.
When Must I Start Keeping Records?
Whether you are registered under GST Act or not, you must start keeping records from the date you provide taxable supply or become a taxable person.
You can charge GST only after you are registered as a GST registered person.
If you register voluntarily, you should start keeping records and charging GST from the date you are registered.
+RECORD KEEPING
Methods of Preserving Records
The taxable person must keep the original documentation
Where the record is in an electronic form, the record shall be kept in such manner as to enable the record be readily accessible and convertible into writing.
When the record is originally in a manual form and is subsequently converted into an electronic record, the record shall be retained in its original form prior to the conversion.
Such records shall be admissible as evidence in any proceedings.
+RECORD KEEPING
Records on GST Summary Sheet
GST summary sheet is a summary of the value of acquisition/supply and input/output tax for each taxable period.
Facilitate taxable persons to submit correct and accurate GST returns.
Assist any audit process.
All the records must be kept up-to-date and must be in sufficient detail to ensure the correct calculation of the amount of GST that you have pay to, or to claim.
Prepare summary sheet with separate headings as follows : Total acquisition and input tax Total supply and output tax Additional information
+RECORD KEEPING
Records to be Kept Regarding Bad Debt Relief Claim Taxable persons are required to maintain and preserve all records
and documents in respect of bad debt.
Additional records that are required to be kept to support bad debt relief claims include :
a) Tax invoice or other documentary evidence showing the time, nature, purchaser and the consideration of the supply;
b) Records or any other documents showing that you have accounted for and paid the tax;
c) Records or any other documents (e.g debtor’s aging list) showing that the consideration has not been received after 6 month from the date of supply and accounted as bad debt in the taxable person’s account ;
+RECORD KEEPING
Records to be Kept Regarding Bad Debt Relief Claim(cont…..)
d) Records or any other documents showing that sufficient effort have been taken by the taxable person to recover the debt e.g. letter of demand from company / company’s solicitor or legal action taken against the debtor;
e) Insolvency records e.g. letter from Department of Insolvency,, court order for winding up, letter of appointment of receiver; and
f) Maintain a single account known as ‘refund for bad debts account’
+RECORD KEEPING
Records for GST Bad Debt Relief Claim
Taxable persons should also maintain a record showing details of supply in respect of each claim made :
a) Details of supply for that claim; The amount of GST chargeable ; The taxable period in which the GST was accounted for and paid to the Director
General; The date and serial number of the invoiced issued; and Any payment received
b) The outstanding GST amount to which the claim relates
c) The total amount of GST claim; and
d) The taxable period in which the claim was made.
All such records have to be kept for a period of seven years from the date of making the claim and shall be produced to the Director General for inspection.
+RECORD KEEPING
Practical Exercise
1. What are the records to be kept for GST purposes?
2. How long should the records be kept?
3. In what languages records must be kept?
4. Can records be kept outside Malaysia?
5. Can records be kept in electronic form?
+ACCOUNTING BASIS
READING
GST ActSection 37 – Accounting Basis
Current Treatment Sales tax – taxpayers declare based on invoices basis
Services tax - taxpayers declare based on invoices and payment basis
Two types of GST accounting basis Invoice basis (accrued)
Payment basis
+ACCOUNTING BASIS1. Accounting for tax on Invoice basis
Account for output tax on the date tax becomes due (at the time of supply)
Basic tax point;
The date of invoices (21 days rule)
The date of invoices or the date of payment, which ever earlier;
Claim input tax on the date of tax invoice
+ACCOUNTING BASISInvoice basis (cont…..)
Advantages : Can claim GST input before payment made to supplier
Easy to account for sales and purchases transaction
Disadvantages : Have to account for GST output before received payment
from customer
Taxpayer might face cash flow problem
+ACCOUNTING BASIS
2. Accounting for tax on Payment basis
A basis where a taxable person is required to account for output tax on the date of payment / other consideration is received.
Claim input tax on the date of payment is made or other consideration is given.
For business dealing solely on cash basis
+ACCOUNTING BASISPayment basis (cont…..)
Advantages : Facilitates small business
Facilitates cash flow
Long term credit period
Disadvantages : Can claim GST input only after payment made
Tax authorities need more monitoring
+ACCOUNTING BASIS
Accounting on Payment basis
Every taxable person shall account for GST on an accrual or invoices basis.
However, the DG may allow a registered person to account for tax on a payment basis.
A person may apply in writing to the DG to account tax on a payment basis.
Persons approved under this scheme : Account for tax on the day on which payment or other
consideration is received
Claim input tax on the date on which payment is made or other consideration is given.
+ACCOUNTING BASIS
Eligibility on Payment basis
Payment basis is applicable only on :
Public body; or
Certain group of registered person due to the nature of business and the nature of the accounting system employed by that person.
Examples :
Retailers, grocery shops, hair salons, restaurant operators etc.
Payment basis is not intended for professional services.
+ACCOUNTING BASIS
Condition on Payment basis
a) Person has submitted all returns and paid all GST required and
b) Person has not in the three years preceding the date of his application for approval:
Been convicted of any offence under the GST Act or the Customs Act, 1967
Accepted any offer of compound under the GST Act or under the
Customs Act, 1967
Had his approval revoked under subsection 37(6) of the Act
+
Non Applicable for Payment Basis :
a) Made under any lease agreement, hire purchase agreement or credit sale agreement where the tittle will pass at some time in the future :
Example : SS Sdn Bhs sells electrical equipment under hire purchase agreement. Hence SS Sdn Bhd cannot use the payment basis.
b) Where are tax invoice is issued and full payment of the amount shown on the invoice is not due for the period in excess of six month from the date of the issue of the invoice;
Example: JK issues a tax invoice for a laptop on January but payment for it is due seven month later. JK cannot use the payment basis.
c) In respect of which a tax invoice is issued in advance of the delivery or making available of the goods or the performance of the services as the case may be.
Example: JL partners issues a tax invoice in June for services to be performed in December. JL partner cannot use the payment basis.
ACCOUNTING BASIS
+ACCOUNTING BASIS
Commencement and Expiry of payment basis
Approval under this scheme is effective for a period of three years only and is subject to extension by the Director General.
Any person who ceases to use the payment basis because it has expired has to account for and pay tax on an invoice basis.
Change in Accounting Basis
Where there is a change in accounting basis, the registered person has to make adjustment of tax and inform the officer of GST regarding the tax payable in respect of the change in the basis of accounting.
+ ACCOUNTING BASIS
Revocation of Approval
The Director General may revoke an approval where the approved person has: Ceased to be public authority; Changed his nature of business; Applied to account for his tax on invoice basis Claimed input tax as though he had not been on payment basis; or Provided any false, misleading or inaccurate declaration or information in his application for
approval.
The Director General may also revoke an approval for the protection of revenue.
A person whose approval is revoked under this scheme have to account for and pay on a return made in respect of his current taxable period all GST which has not been accounted for and paid in accordance with the scheme.
+ ACCOUNTING BASIS
Practical Exercise
1. Name the two types of accounting basis allowed.
2. What is the differences between the two types of accounting basis?
3. Which category of person is eligible for payment basis?
4. What is the time period for approval of payment basis?
5. Under what circumstances will the DG revoke an approval under payment basis?
6. What are condition for payment basis?
7. How does a person account for tax using the payment basis?
8. What is required of a taxable person who changes his basis of accounting?
+TAXABLE PERIOD
READING
GST ActSection 40 – Taxable Period
Regular interval period where a taxable person accounts and pays GST to the government.
The registered person will be allocated monthly and quarterly taxable periods according to the annual business turnover on the approval of GST registration as below :• Total value of taxable supplies in the period of 12
months does not exceed RM 5 million – Quarterly• Total value of taxable supplies in the period of 12
months exceed RM 5 million – Monthly
The default taxable period is the quarterly taxable period.
+TAXABLE PERIOD Taxable person may request in writing to the Director
General for a taxable period other than the two taxable periods above.
For example, businesses which are small or seasonal in nature may quality for half yearly taxable period.
The Director General may, as he deems fit, reassign the taxable person to any taxable period other than the period he has been previously assigned.
The registered person may also apply to vary the length of any taxable period or the date on which any taxable periods begins or ends ( due to the accounting nature of business ).
Example,, the varied taxable period may begin other than the first day of the month. For example, 15th of the month.
+TAXABLE PERIOD
Filling Frequency Taxable Periods
QuarterlyJan-Mar, Apr-Jun, Oct-DecFeb-Apr, May-Jul, Nov-JanMar-May, Jun-Aug, Dec-Feb
Monthly Every Month
Half-yearly(apply in writing to DG)
Jan-Jun, July-DecFeb-July, Aug-JanMar-Aug, Sep-FebApr-Sep, Oct-MarMay-Oct, Sep-AprJun-Nov, Dec-May
+TAXABLE PERIOD
Practical Exercise1. State 2 categories of taxable periods to be assigned on
registration?
2. How is the taxable period determined?
3. Can a taxable person be placed in a category other than the 2 categories mentioned above?
4. What is the requirement to be placed in the quarterly taxable period?
5. If a registered person is on quarterly taxable period, and his first quarterly period is February to April, what is his second quarterly period?
6. If you are on a monthly taxable period, what is your filling frequency?
7. What is the default taxable period?
8. What kind of business quality for a six month taxable period?
+