Director take goods for own use

Director in private limited owned company taken goods for own use, what is the gst treatment  – tax code and document to issue?  Currently this is treated as sales with tax code “SR” to director in debtor account but the amount will not be paid since director wants this to be expensed under the company.

Asked on January 11, 2017 2017-01-11 01:58:53 Business (商家)
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3 Answer(s)

Generally, a taxable person is required to account for output tax on goods or services given as employee benefits because it is regarded as for business purpose. In some cases, output tax must be accounted for on the provision of goods to the employee, even if no consideration is charged. Such situations arise when business goods are given free to the employees or the goods are allowed to be temporarily used free of charge for their private purposes. Deemed supply where goods are given free as gifts to or for temporary private use by employees.

Any goods or services given or provided free by a taxable person to a person who is connected to the taxable person or for the benefits of sole proprietor or directors of the company is deemed as a supply and hence the taxable person is required to account for output tax on such supply based on open market value. For services, please refer to paragraph 6 of the First Schedule of the GST Act whereas for goods paragraph 5(1) of the First Schedule is applicable. Nevertheless, gift rule is still applicable for any goods worth not more than RM500.00. This means output tax need not be accounted for goods where the cost of the goods is not more than RM500.00 given to the person who is connected to the taxable person, a sole proprietor or directors of the company.

A taxable person is required to account for output tax on any use of business goods put to private use or used for non-business purpose such as the usage of goods free of charge by employees because it is deemed to be a supply of services even though the usage is for no consideration provided that the taxable person is entitled to input tax credit on the goods. Please refer to paragraphs 5(3) and 5(4) of the First Schedule of the GST Act.

Answered on January 11, 2017. 2017-01-11 03:00:38
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This mean we should account the goods taken for director’s own use under tax code “DS” based on the OMV of the goods?  Can the value to the goods be expensed off since director will not pay for the goods.  Our entries as follow:-

1. Purchase of goods      DR Inventory, Dr Input Tax, Cr Bank/Supplier
2. Withdraw goods for private use

Answered on January 11, 2017. 2017-01-11 03:56:40
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Yes, you can expense or write-off the Other Debtor / Customer later on.

1.  DR. Purchases / Inventory
DR. Input Tax Credit
CR. Bank / Supplier

2.  DR. Other Debtors / Customers
DR. Output Tax Payable
CR. Purchases / Inventory

Later, if your Debtor / Customer is not going to pay, then the entries will be :
DR. Bad Debts Written Off (If you want to claim back the output tax which you have paid earlier)
CR. Other Debtors / Customers
OR
DR. GST Expense A/C
CR. Other Debtors / Customers

Answered on January 11, 2017. 2017-01-11 08:42:57
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