GST Treatment: Construction Business: Difference between revisions

Latest revision as of 03:06, 22 May 2017

Introduction

This guide will teach you the way to enter the tax invoice to the Developer from Main Contractor.

Time to account for GST is at the either of the following:-

when payment is received;
when tax invoice is issued;
if no tax invoice has been issued within 21 days after the certificate of work done is issued.

We have to look into and show the following items in order to calculate the GST amount in the Tax Invoice:

Certified value - Progress claim value certified by Architect.
Retention Amount - the amount of progress payment which is not paid until the conditions specified in the contract for the payment of such amounts have been met or until defects have been rectified.
Progress payment

For example, the Progress Payment:-

1st interim certificate	Amount (Rm)	Calculation
Value of material and works (A1)	30,000.00
Less: Retention Sum (B1)	(1,500.00)	Rm30,000 x 5%
Amount Paid (excl GST)	28,500.00	A1 - B1
GST Amount	1,710.00	Rm28,500 x 6% (SR)

2nd interim certificate	Amount (Rm)	Calculation
Value of material and works (A2)	90,000.00
Less: Retention Sum (B2)	(4,500.00)	Rm90,000 x 5%
Less : 1st Interim Certificate (C2)	(28,500.00)
Amount Paid (excl GST)	57,000.00	A2 - B2 - C2
GST Amount	3,420.00	Rm57,000 x 6% (SR)

3rd interim certificate	Amount (Rm)	Calculation
Value of material and works (A3)	150,000.00
Less: Retention Sum (B3)	(7,500.00)	Rm150,000 x 5%
Less : 1st Interim Certificate (C3)	(28,500.00)
Less : 2nd Interim Certificate (D3)	(57,000.00)
Amount Paid (excl GST)	57,000.00	A3 - B3 - C3 - D3
GST Amount	3,420.00	Rm57,000 x 6% (SR)

4th interim certificate	Amount (Rm)	Calculation
Value of material and works (A4)	300,000.00
Less: Retention Sum (B4)	(15,000.00)	Rm300,000 x 5%
Less : 1st Interim Certificate (C4)	(28,500.00)
Less : 2nd Interim Certificate (D4)	(57,000.00)
Less : 3rd Interim Certificate (E4)	(57,000.00)
Amount Paid (excl GST)	142,500.00	A4 - B4 - C4 - D4 - E4
GST Amount	8,550.00	Rm142,500 x 6% (SR)

Lastly, the sum of retention will be invoiced after the full inspection of work done.

Retention Sum	Amount (Rm)	Calculation
1st Interim Certificate (R1)	1,500.00
2nd Interim Certificate (R2)	3,000.00	Rm4,500-1,500
3rd Interim Certificate (R3)	3,000.00	Rm7,500-4,500
4th Interim Certificate (R4)	7,500.00	Rm15,000-7,500
Total	15,000.00
GST Amount	900.00	Rm15,000 x 6% (SR)

Tax Invoice Entry

[Sales | Invoice...]

1. Click New.

2. Enter the detail as per below example screenshot.

Progress Billing

Progress billing	Value of work certified	Amount	Retention	Amount After Retention	GST Amount
A1	30,000	30,000 - 0 = 30,000	30,000 x 5% = 1,500	28,500	1,710
A2	90,000	90,000 - 30,000 = 60,000	60,000 x 5% = 3,000	57,000	3,420
A3	150,000	150,000 - 90,000 = 60,000	60,000 x 5% = 3,000	57,000	3,420
A4	300,000	300,000 - 150,000 = 150,000	150,000 X 5% = 7,500	142,500	8,550
Total		Total Value of Work = 300,000	Total Retention = 15,000	285.000	17,100

1st Interim - Tax Invoice

2nd Interim - Tax Invoice

3rd Interim - Tax Invoice

4th Interim = Tax Invoice

Retention Billing

Progress Retention	Retention	GST Amount
R1	1,500	90
R2	3,000	180
R3	3,000	180
R4	7,500	450
Total	15.000	900

Total Retention - Tax Invoice

NOTE: 
GL Account : 399-999 - Retention (Create under the Current Asset)

Value of Material and Works Report by Project

[GL | Print Ledger Report...]

1. To check the total value of material and works balance report. See the screenshot below.

2. You can see the total value of material and works adjusted with final result: Rm300,000.

Retention Report by Project

[GL | Print Ledger Report...]

1. To check the retention balance report. See the screenshot below.

2. If the retention balance is zero, it means the full settlement of retention sum.

Highlight Changes

Date	Initiated by	Remarks
12 December 2015	Loo	Initial document.
16 December 2015	Admin	Correct the retention sum to Rm15,000
22 May 2017	Admin	Simplify and update the invoice screenshot.

@@ Line 101: / Line 101: @@
 :1. Click New.
 :2. Enter the detail as per below example screenshot.<br />
+===<big>'''Progress Billing'''</big>===
+:{| class="wikitable"
+|-
+! Progress billing !! Value of work certified !! Amount !! Retention !! Amount After Retention !! GST Amount
+|-
+| A1 || 30,000 || 30,000 - 0 = 30,000 || 30,000 x 5% = 1,500 || style="text-align:right;"| 28,500 || style="text-align:right;"| 1,710
+|-
+| A2 || 90,000 || 90,000 - 30,000 = 60,000 || 60,000 x 5% = 3,000 || style="text-align:right;"| 57,000 || style="text-align:right;"| 3,420
+|-
+| A3 || 150,000 || 150,000 - 90,000 = 60,000 || 60,000 x 5% = 3,000 || style="text-align:right;"| 57,000 || style="text-align:right;"| 3,420
+|-
+| A4 || 300,000 || 300,000 - 150,000 = 150,000 || 150,000 X 5% = 7,500 || style="text-align:right;"| 142,500 || style="text-align:right;"| 8,550
+|-
+| '''Total''' ||  || '''Total Value of Work''' = 300,000 || '''Total Retention''' = 15,000 || style="text-align:right;"| 285.000 || style="text-align:right;"| 17,100
+|}
 <br />
 :: <big>'''1st Interim - Tax Invoice'''</big>
-::[[File:Construction-Invoice-01.jpg | 240PX]]
+::[[File:Construction-Invoice-A01.jpg]]
 <br />
 :: <big>'''2nd Interim - Tax Invoice'''</big>
-::[[File:Construction-Invoice-02.jpg | 240PX]]
+::[[File:Construction-Invoice-A02.jpg]]
 <br />
 :: <big>'''3rd Interim - Tax Invoice'''</big>
-::[[File:Construction-Invoice-03.jpg | 240PX]]
+::[[File:Construction-Invoice-A03.jpg]]
 <br />
 :: <big>'''4th Interim = Tax Invoice'''</big>
-::[[File:Construction-Invoice-04.jpg | 240PX]]
+::[[File:Construction-Invoice-A04.jpg]]
+<br />
+===<big>'''Retention Billing'''</big>===
+:{| class="wikitable"
+|-
+! Progress Retention !!  Retention !! GST Amount
+|-
+| R1 || style="text-align:right;"| 1,500 || style="text-align:right;"| 90
+|-
+| R2 || style="text-align:right;"| 3,000 || style="text-align:right;"| 180
+|-
+| R3 || style="text-align:right;"| 3,000 || style="text-align:right;"| 180
+|-
+| R4 || style="text-align:right;"| 7,500 || style="text-align:right;"| 450
+|-
+| '''Total''' || style="text-align:right;"| 15.000 || style="text-align:right;"| 900
+|}
 <br />
 :: <big>'''Total Retention - Tax Invoice'''</big>
-::[[File:Construction-Invoice-05.jpg | 240PX]]
+::[[File:Construction-Invoice-A05.jpg]]
 <br />
   '''NOTE: '''
   GL Account : 399-999 - Retention (Create under the Current Asset)
- You have to adjust each progress retention sum by less the previous progress retention sum and reverse back to the account use for the value of material and works.
 <br />
@@ Line 133: / Line 165: @@
 : 1. To check the total value of material and works balance report. See the screenshot below.<br />
 : 2. You can see the total value of material and works adjusted with '''final result: Rm300,000'''.
-::[[File:Construction-GL Ledger-02.jpg | 240PX]]
+::[[File:Construction-GL Ledger-A01.jpg]]
 <br />
@@ Line 141: / Line 173: @@
 : 1. To check the retention balance report. See the screenshot below.<br />
 : 2. If the retention balance is zero, it means the full settlement of retention sum. <br />
-::[[File:Construction-GL Ledger-01.jpg | 240PX]]
+::[[File:Construction-GL Ledger-A02.jpg]]
 ==Highlight Changes==
@@ Line 151: / Line 183: @@
 |-
 | 16 December 2015 || Admin || Correct the retention sum to Rm15,000
+|-
+| 22 May 2017 || Admin || Simplify and update the invoice screenshot.
 |}
 ==See also==
 * [[GST Treatment: How to report GST-03 item 16 Capital Goods Acquired for Purchase of machinery from Oversea]]