Non reviewable Contract

Hi,

Our company has signed a contract in Aug 2014 to supply goods and service for RM155,000.00.There is no clause mentioned about GST in the contract.The goods & service are to be delivered after GST implementation and our customer not willing to bear the GST.
Hence, our company have to account for and bear the GST.

Is this case, how should we raise a invoice to our customer upon delivery after GST implementation?

1. Issue a tax invoice to customer? But in this case, our company bear the GST not the customer.
If we issue tax invoice to customer, is this mean that customer can claim input tax of RM8,773.58 ( RM155,000 X 6/106) which shown in the tax invoice issued to them?

2. Can we issue commercial invoice which did not show the GST amount? Then our company will account for GST output tax in our book and pay to Custom?

Our company has signed a contract in Aug 2014 to supply goods and service for RM155,000.00.There is no clause mentioned about GST in the contract.The goods & service are to be delivered after GST implementation and our customer not willing to bear the GST.
Hence, our company have to account for and bear the GST.

Is this case, how should we raise a invoice to our customer upon delivery after GST implementation?

1. Issue a tax invoice to customer? But in this case, our company bear the GST not the customer.
If we issue tax invoice to customer, is this mean that customer can claim input tax of RM8,773.58 ( RM155,000 X 6/106) which shown in the tax invoice issued to them?
Yes.

2. Can we issue commercial invoice which did not show the GST amount? Then our company will account for GST output tax in our book and pay to Custom?
No.

If your customer is GST-registered and can claim GST (assuming they are not exempt or mixed supplier), there is no need for them to bear the GST! If you do like in (1) above, they are basically getting a discount from you!

Add 6% GST and bill them. If they don't pay the GST amount, claim back as Bad Debt Relief.

I wish to clarify on Q no. 2:

We issue tax invoice to bill customer for RM155,000 add 6% GST of RM9300 = RM164,300. Is this calculation of GST amount correct?
Can I issue a CN to customer for GST amount of RM9300 later since they are not agreed to pay the GST.

My understanding is for non reviewable contract during the transitional period, business takes the liability for GST in respect of taxable supply made after GST implementation if the customer not agreed to bear the GST.The consideration of RM155,000 is deem inclusive of GST.
Hence, the calculation of GST is as per Q no. 1 above i.e RM8,773.58.

In the above case, which amount of GST should my company pay to Custom?

If you follow the rule, GST is calculated on inclusive-basis and you bear the tax.

Latest DG's Panel Decision 2/2015 (http://gst.customs.gov.my/en/rg/Pages/rg_fai.aspx)
allows you to issue Debit Note to recover GST on invoice issued/payment received pre-GST, provided it is issued to another GST-registered person only.

Add 6% GST and bill them. If they don't pay the GST amount, claim back as Bad Debt Relief.

We issue tax invoice of RM164,300 (include GST of RM9,300) to customer and then customer paid to us without the GST amt. After 6 mths , we claim bad debt relief for GST amount.

Is my understanding to the above statement correct?

Yes, but you can only do that to another GST-registered person, based on Customs' latest Panel Decision.

Amount to claim back as Bad Debt Relief after 6 months = RM9,300 x RM155,000 / RM164,300= RM8,773.58.

Three points to clarify whether the below treatment are correct in our company book:

1. Sales amount to recognise in P&L is RM155,000.00 and pay to Custom for RM9,300.00?

2. After 6 mths, claim bad debt relief of RM8,773.58 from Custom?

3. Why the bad debt relief is lower than the GST paid i.e RM9,300?

1. Sales amount to recognise in P&L is RM155,000.00 and pay to Custom for RM9,300.00? Correct.

2. After 6 mths, claim bad debt relief of RM8,773.58 from Custom? Correct.

3. Why the bad debt relief is lower than the GST paid i.e RM9,300?
Wrong computation! The correct amount of bad debt claimable is only RM526.42 = RM9,300 (outstanding amount) / RM164,300 (total invoiced amount) x RM93,000 (GST amount). Please refer Section 58 (2)(b) of the GST Act 2014.

Sorry, a bit confuse,

Refer no. 3 above the total bad debts relief to be claim from custom is RM8,773.58 or RM526.42?

Wrong computation earlier. The correct amount claimable is only RM526.42.

Hence, the correct treatment in our company book as following:

1. Revenue recognise of RM155,000.00 and pay GST to custom for RM9,300.00

2. After 6 mths, claim bad debt relief for RM526.42.

Is this mean that our company still have to bear to GST of RM8,773.58 ( GST paid of RM9,300 less bad debt relief f RM526.42)?

You are absolutely right!!! It makes no difference! In fact, it is worse off because we have to wait for 6 months for the difference.

The issuance of Debit Note to recover the GST and subsequent claiming of the GST amount not paid as bad debt relief - that advice came from a prominent GST consultant.

Thanks, Evon for asking the question and for your enlightenment!

... thanks for your probing questions...

However, if your customer agrees to pay the GST (a GST-registered person can claim the input tax unless it relates to his exempt supply), do issue Debit Note to charge the customer the GST. In that case, you won't have to bear the GST.

Thanks Joseph for your advice thus far, it is very much help me at work.

In respect of Panel Decision 2/2015 on Debit note, in this case what is the GST amount to bill to customer if customer agreed to pay GST?

1. RM155,000 X 6/106 = RM8,773.58 ?
2. RM155,000 @ 6% GST = RM9,300.00 ?

The GST amount to bill is RM9,300.

This Panel Decision 2/2015 is only applicable if we have issued invoice before 1st Apr 2015 to customer and goods only delivered on and after 1st Apr 2015.Am I right correct?

Yes, it is a transitional ruling.