GST Treatment: Partial Exemption

Introduction

This guide will explains how Partial Exemption, Apportionment and Annual Adjustment are made in respect of residual input tax which is attributable to both taxable and exempt supplies in SQL Financial Accounting.

Partial Exemption Rules

Input Tax Recoverable Ratio (IRR)

Formula:

IRR = (T-O) / (T+E-O)

T = SR + ZRL + ZRE + DS + OS + RS + GS

E = ES

O = ES43 (Incidental financial supplies)

ES (Disposal of assets which are exempted eg. residential house)

SR (Disposal of assets)

DS (Self-recipient accounting transactions, ie. any supplies users make to themselves eg. imported services etc.)

OS (Out of scope transactions which are not taxable in Malaysia)

De Minus Rule (DMR)

To satisfy the De Minus Rule:

1. DMR <= 5% and

2. Total Exempt Supply (ES) <= Rm5,000.00 per month

Formula:

DMR = ES / ES + (SR + ZRL + ZRE + DS + OS + RS + GS)

Input Tax Claimable Logic (Based on DMR)

Below is the summary of the calculation logic based on DMR to determine the input tax claimable.

Tax Code	Tax Rate	Fulfill DMR?	Input Tax Claimable (ITC)
TX-RE	6%	Yes	ITC x 100%
TX-RE	6%	No	Example

TX-E43	6%	N/A	ITC x 100%

TX-N43	6%	Yes	ITC x 100%
TX-N43	6%	No	ITC x 0%

Partial Exempt in SQL Financial Accounting

Example 1

Mixed Co. Sdn Bhd., whose current tax year ends on 31 December 2016, has in his taxable period of April 2015, made some mixed supplies and at the same time incurred residual input tax as follows.

		RM
t	Value of all taxable supplies, exclusive of tax	200,000.00
e	Value all of exempt supplies	40,000.00
o	Value of a capital goods disposal off (exclusive of tax)	50,000.00
o	Value of incidental exempt supplies	20,000.00
	Residual Input Tax Incurred	10,000.00

Based on the above example to enter into SQL Financial Accounting, the below result generated from GST-Listing:

1st Interim - Tax Invoice

2nd Interim - Tax Invoice

3rd Interim - Tax Invoice

4th Interim = Tax Invoice

Total Retention - Tax Invoice

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.

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