AR Bad Debt Relief

Explanation

Output Tax has to be reported either upon Invoice or Collection, whichever comes first.

Thus, a business will need to report and pay the Output Tax once an Invoice is issued, regardless if the customer has paid.

However, if the customer does not pay up within 6 months, the business can declare that particular Invoice as Bad Debt and claim Bad Debt Relief, which will increase Input Tax for the month, and subsequently offset the Output Tax that the business will need to pay to the Royal Custom.

Guide

1. Control Panel > System Admin > EMP Configurations > Tax > Purchase (Input Tax) : assign a GL Code as Default GL Code for AR Bad Debt Relief (Refer to GST Setup User Guide (2015-04-01) 3.3: Purchase (Input Tax))

2. Extended Modules > Malaysia GST > AR Bad Debt Relief

3. Date (as of) : Select the 2015 October filling cycle, system will list out the 2015 April outstanding documents. Select the Invoice for claim Bad Debt Relief, than click "Claim Relief"

Detail explanation on the listing above

Table	Description
Document	Invoices that have outstanding amount 6 months after being issued
Amount Before Tax	Invoice total amount before tax
Total GST Amount	Tax amount for the Invoice
Outstanding Amount Before Tax	Invoice current outstanding amount before tax
Bad Debt Relief Claimable	Tax amount for the outstanding amount

Note : an Invoice can be partially settled, thus, the Tax Amount claimable will always be calculated based on the outstanding amount, instead of the Total Invoice Amount

Refer example below on the Tax Amount claimable calculation

INV1275 : Total Amount = RM1,990, Outstanding Amount = RM500

Item	Amt bf Tax	Tax Rate	Tax Amt	Amt After Tax	Weight (Item amt After tax / Total amt of tax	O/S Amt (weight * Ttl O/S Amt)	Bad Debt Relief Claimable (O/S Amt / (100 + Tax Rate) * Tax Rate	O/S bf Tax
Item A	RM1,000	6%	RM 60	RM 1,060	1,060 / 1,990 = 0.53266	RM 266.33	RM 15.08	RM251.25
Item B	RM 500	6%	RM 30	RM 530	530 / 1,990 = 0.26633	RM 133.165	RM 7.54	RM125.63
Item C	RM 400	0%	RM 0	RM 400	400 / 1,990 = 0.20101	RM 100.505	RM 0	RM100.50
Total	RM1,900		RM 90	RM 1,990		RM 500	RM 22.62	RM477.38

4. Once you click "Claim Relief", a Credit Memo will automatically be created to record the relief. The Credit Memo will be as below, whereby badDebtAR is the "Default GL Code for AR Bad Debt Relief" that you have setup in EMP Configuration. The CM date is filing cycle end date.

5. Please proceed with the Output Tax Filling Step (Output Tax Filing)

6. The CM recorded in Input Tax Invoice Report, tax code: AJP (Input Tax Invoice Report)

7. GST-03 Report, on 6b Total Input Tax (Inclusive of Bad Debt Relief & other Adjustments) and 17 Bad Debt Relief

Malaysia Royal Custom DG's Decisions

http://gst.customs.gov.my/en/rg/SiteAssets/Keputusan%20KP/DG/DGD%201%202014/ITEM%203.pdf