GST Treatment: Partial Exemption

From eStream Software

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:
Partial Exempt-01.jpg




1st Interim - Tax Invoice
Construction-Invoice-01.jpg


2nd Interim - Tax Invoice
Construction-Invoice-02.jpg


3rd Interim - Tax Invoice
Construction-Invoice-03.jpg


4th Interim = Tax Invoice
Construction-Invoice-04.jpg


Total Retention - Tax Invoice
Construction-Invoice-05.jpg


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.
Construction-GL Ledger-02.jpg


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.
Construction-GL Ledger-01.jpg

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