hi…i got some enquiry on GST. The scenario is under 3 companies (company A,B & C) 1) Company A bill Company B tax invoice include GST RM300.00. 2) Company B take in this cost as TX and under clearing & contra a/c. 3) Company B bill to Company C RM300.00 include GST (tax code:SR) 4) Company C take in this cost RM300.00 as TX. Question: Is this correct that Company B take in this cost as TX and bill to Company C SR?
Company B has to account for GST output tax @ 6% SR on the full tax invoice total amount received from Company A to issued a tax invoice to Company C.
Company B and C can claim input tax credit under TX.
Hi Expert,
you mean that :-
Company A bill Company B RM300.00 + 6% GST = RM318.00
Company B billed Company C RM318.00 + 6% GST?
Company C take in cost RM318.00 + 6% and tax code is TX?
Hi Expert,
According to above scenario,can i do as below:-
1) Company A bill Company B RM300.00 + 6% GST = RM318.00
2) Company B take in this cost as TX at clearing & contra a/c. RM318.00
3) Company B billed Company C RM300.00 + 6% GST = RM318.00 (Tax code:SR)
4) Company C capture this cost as TX. RM318.00
Question: Do the above scenario allow?
The question is did Company B do any supply? Why is Company B stands in the middle? Can Company A bill Company C direct?
Company B didn’t do any suppy, it just a inter company, company B take all the cost and separate out the expenses to all subsidiaries company.
Is it really necessary for Company B to be the middleman?
Yes. this is company policy.
Then you have no other alternatives but to issue tax invoice from Company B the total amount (full amount from Company A) with GST @ 6% SR to Company C.
Hi Expert,
you mean which scenario i need to do?
Scenario A
Company A bill Company B RM300.00 + 6% GST = RM318.00
Company B billed Company C RM318.00 + 6% GST=RM337.08
Company C take in cost RM337.08 and tax code is TX.
Scenario B
1) Company A bill Company B RM300.00 + 6% GST = RM318.00
2) Company B take in this cost as TX at clearing & contra a/c. RM318.00
3) Company B billed Company C RM300.00 + 6% GST = RM318.00 (Tax code:SR)
4) Company C capture this cost as TX. RM318.00
The tax invoice is in which company’s name?
I guess the expenses (invoice) is in Company’s A name, so there is no way for Company A to claim the input tax even he pay for it.
Option B is correct option, but Company A cannot issue tax invoice, just normal invoice will do, because disbursement is not a supply and not subject to GST.
Option A is not an option because if there is a reimbursement, the expenses must in Company A’s name.
Please read through and try to understand it and you will know where to go.
Disbursement and reimbursement are the method of recovery of expenses.
It happens when you help somebody pay his expenses and bill him afterwards to recover the expenses.
Definition of Reimbursement
“Reimbursement” refers to the recovery of an expense that you incur as a principal from your client (another party). A reimbursement is a supply and subject to GST .
Definition of Disbursement
“Disbursement” refers to the recovery of a payment made on behalf of another party by you as an agent. A disbursement does not constitute a supply and hence, is not subject to GST.
Definition of Principal
Generally, you are acting as a principal in procuring the goods or services if you contract with the supplier in your own name or capacity. The expenses are incurred by you, invoice is in your name.
Definition of Agent
You are acting as an agent if the expenses are incurred by client (another party), invoice is in client’s name. You will make the payment on his behalf.
GST treatment on disbursement and reimbursement are as follows –
| Disbursement | Reimbursement |
| Not a supply | Is a supply |
| Not entitled for input tax claim | Entitled for input tax claim |
In general, the criteria for disbursement and reimbursement for GST purposes are as follows –
| Disbursement | Reimbursement |
| Incur expenses as an agent acting on behalf of the client. | Incur expenses as a principal. |
| The client is the recipient of the supply (invoice is in the client’s name) | The client is not the recipient of the supply (invoice is in the principal’s name). |
| The client is the person responsible to pay for the supply | The principal is the personresponsible to pay for the supply. |
| The payment is authorised by the client. | The payment is not authorised by the client. |
| The client knew that the supply is made by a third party. | The client has no knowledge that the supply is made by a third party. |
| The exact amount is claimed from the client and the agent has no right to alter or add on the value of the supply | The principal has the right to alter or add on the value of the supply. |
| The payment is clearly an additional to the supply made to the client. | The payment is for the supply made to the client. |
Tax code for Reimbursement
Input tax: TX
Output tax: SR
Tax code for Disbursement
Input tax: OP
Output tax: OS
Invoicing for Reimbursement
Issue tax invoice compliance with GST.
Invoicing for Disbursement
Issue normal invoice*.
*See also: Do I need to issue tax invoice for EVERY transaction?