Service Tax - 12 Month Deemed Paid Rule

This article is for:

• ABSS Premier v23.1
• ABSS Accounting v28.1

Based on Section 11 Service tax (Amendment) ACT 2019 (Royal Malaysian Customs Department), any taxable service provided by the registered person is not received from the customer within a period of twelve months from the date the taxable service was provided, the service tax shall be due on the day following that period of twelve months. 

How to handle 12 Month Deemed Paid Rule in ABSS 

Scenario 1 : User does not perform financial year end 

1) Record Sales Invoice

To record the sales invoice, go to Sales > Enter Sales > and enter the service sale amount with S06 tax code. ( Example as per the image below) 

2) Service Tax Declaration - after 12 months

After 12 months from the invoice date, the user needs to declare service tax even though the customer does not pay to them. User needs to record the payment after 12 months from Invoice date/ date of service was provided. To record the payment, kindly go to Received payment > select Provision of doubtful debt account ( Asset) account. ( Refer the image below).

To record the regular payment received from the customer, we must select a Bank account. However, for this case, since the user does not receive any payment from the customer, the user needs to choose Prov for Doubtful Debts account. Once the user records the payment, the Service Tax amount will appear in field 11c. ( SST 02 Report)

3) Record back the invoice

Please note that the user does not receive any payment from the customer yet. So they need to record back the invoice using the same Invoice date. This time, the user needs to using Prov'n for Doubtful Debts account. Kindly record the invoice as per the image below. 

4) Received Payment

Once the user received the payment from the customer, record the payment received as usual. This time the amount should not reflect inside SST 02 report.

Scenario 2 : User has performed financial year end 

1) Record Sales Invoice

To record the sales invoice, go to Sales > Enter Sales > and enter the service sale amount with S06 tax code. ( Example as per the image below) 

2) Service Tax Declaration - after 12 months

After 12 months from the invoice date, the user needs to declare service tax even though the customer does not pay to them. User needs to record the payment after 12 months from Invoice date/ date of service was provided. To record the payment, kindly go to Received payment > select Provision of doubtful debt account ( Asset) account. ( Refer the image below).

To record the regular payment received from the customer, we must select a Bank account. However, for this case, since the user does not receive any payment from the customer, the user needs to choose Prov for Doubtful Debts account. Once the user records the payment, the Service Tax amount will appear in field 11c. ( SST 02 Report)

3) Record back the invoice

After the user performs year end closing, ABSS does not allow them to record last year invoice. So the user needs to using historical sales module to record back the last year invoice. Transfer invoice outstanding balance into Historical Invoice dated 26 Jan 2019 with ‘NT’ tax type

To record it, kindly go to Setup > Balances > Customer Balances > record as the image below. Enter the amount, including tax, and the tax code is N-T.

The double entry for this transaction is : Debit Trade Debtor and Credit Trade Debtor

4) Received Payment

Once the user received the payment from the customer, record the payment received as usual. This time the amount should not reflect inside SST 02 report. The double entry for this payment is : Debit Bank and Credit Trade Debtor

5) Record the journal to reverse amount Prov of Doubtful Debt account

Please note the amount inside Prov of Doubtful Debt is still hanging. Once the user received the payment from their customer, they need to record the journal to reverse back the amount prov of Doubtful Debt and transfer back to Trade Debtor. Record the double entry as per below :