Exact Globe

Product Update 412: Tracking and creating bad debt relief or recovered GST entries (Malaysian legislation)

Goods and Service Tax (GST) has been introduced in Malaysia since 1st April, 2015. Exact Globe Next supports this regulation since product update 409. For more information, see Product Updates 410, 409 and 408: Goods and services tax (GST) return reporting functionality introduced (Malaysian legislation).

As per the GST Act, a GST registered company is entitled to make claims for bad debt relief when the company:

has not received full or partial payment from the debtor within a period of six months from the date of supply, and
sufficient efforts have been made by the company to recover the debt, for example, a debtor statement and reminder have been sent regularly to the debtor within the period.

The statutory time limit to make such a claim is within six years from the time of supply. When a GST registered company has recovered the amount in full or partially from the debtor, the company has to pay back to Royal Malaysian Customs, the GST tax amount that has been claimed previously as bad debt relief. This GST tax amount will be calculated in proportion to the payment recovered from the debtor.

Bad debt relief and bad debt recovered are also applicable to the supplier. When the GST registered company has not made any payment to their supplier within a period of six months, the company has to pay back the previously claimed input tax amount to Royal Malaysian Customs.

To retrieve invoices whereby the payments have not been received from debtors, or paid to creditors after six months from the date of supply, a new functionality is introduced. This functionality allows you to generate the bad debt relief proportionally based on the outstanding invoice amount on condition that such an invoice has a GST return period assigned and GST return performed.

The new feature has been added at Finance ? VAT/Statistics ? VAT check.

A new section Adjustment has been added. By selecting 21 days you can access the functionality previously available via this menu. The new feature can be accessed by selecting Bad debt management.

In the Display section, the following four options are available:

Sales: Relief - Select this option to generate relief for sales invoices for which the receipt is due and has passed six months.
Sales: Recovered - Select this option to generate recovery for sales invoices, for which relief has been claimed previously, but a payment from the customer has been received.
Purchase: Relief - Select this option to generate relief for purchase invoices, for which tax has been claimed previously, but the payment has not yet been made to the supplier.
Purchase: Recovered - Select this option to generate recovery for purchase invoices for which relief has been generated before, and now the payment to the supplier has also been made.

Using the fields in the General section, you can make a selection on the entries you want to display. In the Entry section, you can select the journal, suspense account, and VAT code that will be used to create the sales or purchase bad debt relief or recovered entry.

After defining the fields in this screen, the Bad debt management screen can be opened by clicking the Display button.

The Bad debt management screens for Sales: Relief and Sales: Recovered contain information on the debtors and invoices of the sales invoices.

Besides this information, the following columns are available:

Invoice amount – This displays the sales invoice amount.
Matched amount – This displays the amount that is matched to the sales invoice.
VAT return – This displays the total final VAT.
Outstanding amount – This displays the outstanding amount of the sales invoice.
Generated Bad debts: Basis – This displays the total of previously generated VAT basis for relief or recovery.
Generated Bad debts: VAT - This displays the total of previously generated VAT for relief or recovery.
Proposed: Basis – This displays the proposed VAT basis to pay or claim.
Proposed: VAT – This displays the proposed VAT to pay or claim.
Age – This displays the number of days calculated from the invoice or reporting date.

The Bad debt management screens for Purchase: Relief and Purchase: Recovered contain information on the creditors and invoices of the purchase invoices.

Besides this information, the following columns are available:

Invoice amount – This displays the purchase invoice amount.
Matched amount – This displays the amount that is matched to the purchase invoice.
VAT return – This displays the total final VAT.
Outstanding amount – This displays the outstanding amount of the invoice.
Generated Bad debts: Basis – This displays the total of previously generated VAT basis for relief or recovery.
Generated Bad debts: VAT – This displays the total of previously generated VAT for relief or recovery.
Proposed: Basis – This displays the proposed VAT basis to pay or claim.
Proposed: VAT – This displays the proposed VAT to pay or claim.
Age – This displays the number of days calculated from the invoice or reporting date.

Creating entries

Using the Process button in the Bad debt management screen, you can create the following entries:

Sales: Relief

The Sales: Relief entry can be created when the following conditions are met:

The sales invoice is created.
The final return is done, which means that VAT has been paid to the Government.
The invoice is still outstanding, which means that the customer has not yet fully paid the invoice after X amount of days (X is the number of days entered at the Age field at Finance ? VAT/Statistics ? VAT check).
The non-receipt portion of such a sales invoice is eligible for a sales relief.

The following entry will be created:

Date	GL	Debit	Credit	VAT
Login date	Suspense GL from VAT check filter screen	Proposed: Basis		VAT code from VAT check filter screen
Login date	VAT to claim	Proposed: VAT		VAT code from VAT check filter screen
Login date	Suspense GL from VAT check filter screen		Proposed: Basis + VAT	0

Sales: Recovered

The Sales: Recovery entry can be created when the following conditions are met:

Sales relief is generated for the sales invoice.
A receipt is received after the generation of sales relief.
The received portion of such a sales invoice is eligible for a sales recovery.

The following entry will be created:

Date	GL	Debit	Credit	VAT
Login date	Suspense GL from VAT check filter screen		Proposed: Basis	VAT code from VAT check filter screen
Login date	VAT to pay		Proposed: VAT	VAT code from VAT check filter screen
Login date	Suspense GL from VAT check filter screen	Proposed: Basis + VAT		0

Purchase: Relief

The Purchase: Relief entry can be created when the following conditions are met:

The purchase invoice is created.
The final return is made, which means that VAT has been claimed from the Government.
The invoice is still outstanding, which means that the full payment is not yet made to the supplier after X amount of days (X is the number of days entered at the Age field at Finance ? VAT/Statistics ? VAT check).
The non-paid portion of such a purchase invoice is eligible for purchase relief.

The following entry will be created:

Date	GL	Debit	Credit	VAT
Login date	Suspense GL from VAT check filter screen		Proposed: Basis	VAT code from VAT check filter screen
Login date	VAT to pay		Proposed: VAT	VAT code from VAT check filter screen
Login date	Suspense GL from VAT check filter screen	Proposed: Basis + VAT		0

Purchase: Recovered

The Purchase: Recovered entry can be created when the following conditions are met:

Purchase relief is generated for the purchase invoice.
A payment is received after the generation of purchase relief.
The paid portion of such a purchase invoice is eligible for a purchase recovered.

The following entry will be created:

Date	GL	Debit	Credit	VAT
Login date	Suspense GL from VAT check filter screen	Proposed: Basis		VAT code from VAT check filter screen
Login date	VAT to claim	Proposed: VAT		VAT code from VAT check filter screen
Login date	Suspense GL from VAT check filter screen		Proposed: Basis + VAT	0

Points to note:

It is not possible to delete sales relief or recovered entries as the entries are posted automatically. The Delete button is disabled for these entries. It is also not possible to void a sales bad debt relief entry when there is a corresponding bad debt recovered entry available. You first have to void the recovered entry to be able to void the relief entry.
When trying to delete such an entry, the message, "Not allowed: Sales: Recovered: Already exists" will be displayed.
It is not possible to void a purchase bad debt relief entry when there is a corresponding bad debt recovered entry available. You first have to void the recovered entry to be able to void the relief entry.
When trying to delete such an entry the message, "Not allowed: Purchase: Recovered: Already exists" will be displayed.
Users that do not have the function right To see financial transactions payroll data will not be able to see the payroll transaction in the Bad debt management screen.
After generating the Sales: Relief, Sales: Recovered, Purchase: Relief, or Purchase: Recovered entry, you should not unmatch the VAT return transactions.
After generating the Sales: Relief, Sales: Recovered, Purchase: Relief, or Purchase: Recovered entry, you should not delete the final VAT return.
When deleting the receipt or payment after generating the Sales: Recovered or Purchase: Recovered entry, the line will still be displayed in the Bad debt management screen when selecting the option Sales: Recovered or Purchase: Recovered.

Main Category:	Support Product Know How	Document Type:	Release notes detail
Category:	Release Notes	Security level:	All - 0
Sub category:	Details	Document ID:	27.099.776
Assortment:	Exact Globe	Date:	04-07-2016
Release:		Attachment:
Disclaimer

Tags	Legislation-MY Localisation Support Product Know How-Release Notes-Details