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NEWs

ISSUE 2
DATED 19.11.2015

Goods and Services Tax (GST):

Bad Debt Relief
1.0

Introduction

Goods and services tax (GST) rested on the concept of input tax and output tax founded
on accrual basis. In the case of sale of goods or provision of services, tax invoice need to be
issued latest at 21days from the time of supply determined as follows:
Time of supply
(a)
Sale of goods
(b)
Provision of services

Customer acknowledge receipt of goods

Service are performed

Tax invoice is the document to capture the accountability of output tax notwithstanding
the payment has not been received from the customer.

2.0

Submission of return

Tax invoice issued within the taxable period need to be accounted output tax one month
upon the expiration of that taxable period. Any input tax is available to be deducted from
the total output tax, resulting only the net amount to be accounted to the Royal Malaysia
Customs (RMC). These are reflected in the tax return submitted.

3.0

Bad debt relief

The government acknowledges the cash flow difficulty to GST registrant to account
output tax based on accrual basis. It is in this regard s 58 is legislated allowing bad debt
relief as an input tax deduction for any outstanding payment not received 6 months from
the date of supply. Date of supply refers to the date where tax invoice is issued.
In the event a particular trade debtor is found bankrupt, company being liquidated, death
of the debtor, then bad debt relief is available at the time such circumstance justified even
before the expiration of the 6 months from the invoice date.
Section 58 does not mandatory required GST registrant to claim bad debt relief but
allowing them discretion whether to seek such input tax deduction as bad debt relief.

4.0

DGs decision

The DGs decision 1/2014, item 3 requires the GST registrant to notify the RMC within 30
days after the expiration of the 6 months on its intention to claim at the later date. This
takes effect from 28.10.2015.

PAGE 1 OF 3

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NEWs

ISSUE 2
DATED 19.11.2015

Goods and Services Tax (GST):

Bad Debt Relief
In practice, it is pragmatic to delay claiming the bad debt relief at the expiration of the 6
months from the date of supply, being reason that the debtor is continue making payment
to the GST registrant and also such GST registrant is continue providing taxable supply to
such debtor.
A copy of the sample of bad debt relief letter addressed to the RMC for not claiming bad
debt relief has been uploaded to GST Estate earlier.

5.0

Must debtor be GST registrant?

In item 3(ii) of the DGs decision 1/2014, provided that bad debt relief can be claimed if:
(a)
(b)

The statutory requirement of s 58 and part X of GST Regulations 2014 [PU(A)

190/2014] are fulfilled; and
The supply is made to GST registrant.

This would mean that no bad debt relief is available if the trade debtor is non GST
registrant.
With greatest due respect, the author beg to differ as the fundamental of GST Act 2014 is
that so long the GST registrant has accounted output tax in the tax return, he is as of right
able to claim bad debt relief so long the statutory requirement of s 58 and part X of GST
Regulations 2014 [PU(A) 190/2014] being satisfied.

6.0

Conditions to claim bad debt relief

In order to claim bad debt relief, the following conditions need to be complied with:
(a)
(b)
(c)
(d)
(e)
(f )
(g)

PAGE 2 OF 3

Tax invoice - showing time, nature, purchasers details and consideration of

supply;
Receipt - showing GST has been accounted / paid;
Debtors aging list showing consideration has not been received after 6
months from invoice date;
Accounts showing amounts has been written off as bad debts;
Letters of demand or reminder from company / letter from solicitor / legal
action, engagement and actions from credit agency;
Insolvency records from debtor;
Maintain single account refund for bad debts account.

GST Estate Dr Choong Kwai Fatt

 GST website powered by Dr Choong Kwai Fatt

NEWs

ISSUE 2
DATED 19.11.2015

Goods and Services Tax (GST):

Bad Debt Relief
Records requirements to claim bad debt relief:
Inv
No

Inv
Date

PAGE 3 OF 3

Invoice
amount
inclusive GST

GST
paid

Taxable
period
GST paid

Payment
received

Outstanding
amount

Bad debt
relief (A)
claim

Taxable period
where A
claimed

Age
(mths)

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