GST Treatment: Partial Exemption: Difference between revisions

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===Residual Input Tax Claimable Logic (Based on DMR)===
===Input Tax Claimable Logic (Based on DMR)===
: Below is the summary of the calculation logic based on DMR to determine the input tax claimable.
: Below is the summary of the calculation logic based on DMR to determine the input tax claimable.
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Revision as of 03:06, 23 April 2016

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 = Total Value of excluded the following supplies made in the taxable period.
1. ES43 (Incidental financial supplies)
2. ES (Disposal of assets which are exempted eg. residential house)
3. SR (Disposal of assets)
4. DS (Self-recipient accounting transactions, ie. any supplies users make to themselves eg. imported services etc.)
5. 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 ITC x IRR
TX-E43 6% N/A ITC x 100%
TX-N43 6% Yes ITC x 100%
TX-N43 6% No ITC x 0%

How to exlude the IRR for the capital goods disposal off?

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


For example, 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

Steps

1. Go to GST | Maintain Tax...
2. Edit the SR tax code.
3. Click on the tax rate lookup. See the screenshot below.
Partial Exempt-01.jpg


4. Click +' sign follow by IRR Excluded to insert additional tax rate 6% IRR excluded.
Partial Exempt-02.jpg


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.
Partial Exempt-03.jpg


8. You will found the IRR calculated (88.24%) and the GST-Listing breakdown by tax code as shown in the screenshot below.
Partial Exempt-04.jpg


IRR calculation:
Calculation RM
t Value of all taxable supplies, exclusive of tax 100,000 (SR) + 50,000 (ZRL) + 50,000 (OS) 200,000
e Value all of exempt supplies 20,000 (ES) + 20,000 (ES43) 40,000
o Value of a capital goods disposal off (exclusive of tax) 50,000 (SR with tax rate E6%) 50,000
o Value of incidental exempt supplies 20,000 (ES43) 20,000
Residual Input Tax Incurred 166,666.66 X 6% (TX-RE) 10,000.00

9. Therefore, IRR = (200,000 -50,000) / (200,000 + 40,000) - (50,000 + 20,000) = 0.8824 (88.24%).
10. The amount of residual input tax can claim for the period is,
Residual Input Tax Recovery % X Residual Input Tax = 88.24% x Rm10,000 (TX-RE) = Rm8,824.00.
Partial Exempt-05.jpg


RMCD Reference:
We get the similar example from Partial Exempt guide by Royal Malaysian Customs Department. 
See the screenshot below.
::Partial Exempt-00.jpg


See also