GST Guide on Transition Issues

Our Ref: Newsletter-22-2019

Recently, the Royal Malaysian Customs Department (RMCD) issued two new GST guides dated 19 April 2018 to assist businesses in understanding the tax treatment during the GST transition period.

Where there is any inconsistency between previous GST decisions and the decisions stated in the new guide, the decisions in the new guide shall prevail.

1. GST Guide on Tax Invoice, Debit Note, Credit Note and Retention Payment After 1 September 2018

Tax Invoice

• A registered person who makes a taxable supply before 1 September 2018 is not allowed to issue a tax invoice after 1 September 2018.
• However, an invoice (other than a tax invoice) may be issued, and the output tax must be accounted for in the final return on or before 29 December 2018.
• Any GST due but not yet accounted for must be amended and paid in the final return.

Debit Note & Credit Note (Issued)

If a debit note or credit note is issued after submission of the final return for taxable supplies made before 1 September 2018:

• Adjustments must be made on or before the last day of the month in which the debit/credit note is issued.
• Debit note issued: Increase output tax (GST-03).
• Credit note issued: Reduce output tax (GST-03).

Debit Note & Credit Note (Received)

If a debit note or credit note is received after submission of the final return:

• Adjustment must be made before the last day of the month in which the document is issued.
• Debit note received: Increase input tax.
• Credit note received: Reduce input tax.

Retention Sum

A registered person is not required to account for tax on any retention payment received on or after 1 September 2018 if it relates to work done before 1 September 2018.

Comment:
This aligns with Paragraph 7 of GST Regulation 2014, where supply is treated as taking place when payment is received or a tax invoice is issued, whichever is earlier.

2. GST Guide on Declaration and Adjustment After 1 September 2018

Bad Debt Relief

After 1 September 2018, a registered person may claim tax as bad debt relief by amending the final return (Column 6(b) and Column 17 in GST-03), subject to conditions:

• Tax has been paid in respect of the taxable supply.
• No payment received after six months from the date of supply or debtor has become insolvent.
• Reasonable recovery efforts have been made.
• Proper documentation and records have been maintained.

Bad Debt Recovery

If payment is subsequently received after 1 September 2018:

• The recovery must be accounted for.
• The final return must be amended (Column 5(b) and Column 18).

Adjustment for Outstanding Amount Due to Supplier

If a registered person has claimed input tax but fails to pay the supplier within 6 months:

• Adjustment of output tax must be accounted for.
• The final return must be amended (Column 5(b)).

Repayment of Outstanding Amount

If payment to supplier is made after 29 December 2018:

• The registered person may claim the overpaid GST by amending the final return (Column 6(b)).

Example

Honey Sdn Bhd issued a tax invoice on 15 May 2018 and claimed input tax in May 2018. If the customer fails to pay until November 2018, the outstanding amount must be accounted for in the final return (Column 5(b)).

If payment is made later (e.g., February 2019), the overpaid tax may be claimed in the final return (Column 6(b)).

For further information, please contact us at:
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Disclaimer: This newsletter is for general information only and should not be relied upon without professional advice.