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GST paid is not entitled to claim input tax credit.
Examples are:
1. The purchase, import or hiring of passenger motor car
2. Club subscription fee
3. Medical personal accident insurance premium (takaful)
4. Medical related expenses - bed, wheel chairs, etc
5. Family benefits: Holiday trips
6. Entertainment expenses to a person other than employees or existing customers except entertainment expenses incurred by a person who is in the business of providing entertainment.
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Block Tax Accounting Treatment
What is the double entry to purchase of passenger motor car? Let's said the purchase value is Rm106,000.00 (inclusive Tax).
DR Fixed Asset (BL) 100,000.00
DR Fixed Asset (BL) 6,000.00
CR Bank/Other Creditor 106,000.00
Why block tax amount of Rm6,000.00 added to Fixed Asset cost?
It is because the purchase price of the item and related taxes should assign to a fixed asset.
Any costs to assign to a fixed asset are its purchase cost and any costs incurred to bring the asset to the location and condition needed for it to operate in the manner intended by management.
Assign the following costs to a fixed asset:
1. Purchase price of the item and related taxes
2. Construction cost of the item, which can include labor and employee benefits
3. Import duties
4. Inbound freight and handling
5. Interest costs incurred during the period required to bring an asset to the condition and location necessary for its intended use
6. Site preparation
7. Installation and assembly
8. Asset startup testing
9. Professional fees
10. The cost of major periodic replacements. For example, a building requires a new roof.
Do not assign the following costs to a fixed asset:
1. Administration and general overhead costs
2. Costs incurred after an asset is ready for use, but has not yet been used or is not yet operating at full capacity
3. Costs incurred that are not necessary to bring the asset to the location and condition necessary for it to operate
4. Initial operating losses
5. New customer acquisition costs
6. New facility opening costs
7. New product or service introduction costs
8. Relocation or reorganization costs
9. Ongoing costs of servicing a fixed asset. For example, maintenance labor, consumables, and minor maintenance parts; these costs should instead be charged to expense as incurred.
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