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

How to enter the capital goods disposal off?

Disposal of asset are using the tax type SR to report as Tax Payable in GST-03. However, this taxable amount must be excluded (o) from the total value of all taxable supplies (t).

Steps:

1. Go to GST | Maintain Tax...

2. Edit the SR tax code.

3. Click on the tax rate lookup. See the screenshot below.

4. Click +' sign follow by IRR Excluded to insert additional tax rate 6% IRR excluded.

Note:
1. Tax Rate set as EA or E6%. 
2. E = Exclude from IRR formula.

5. Enter the disposal of asset in Cash Book Entry (OR).

6. Select tax code SR.

7. Select tax rate E6% to exclude from IRR calculation.

8. You will found the IRR calculated (88.24%) and the GST-Listing breakdown by tax code.

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

See also

• GST Treatment: How to report GST-03 item 16 Capital Goods Acquired for Purchase of machinery from Oversea