IS GST
RECEIVABLE AN ASSET?
Recently, my son, an Australian non-Accounting undergraduate
approached me and asked me whether GST receivable is an asset or a liability.
On the surface, I noticed that his question invite discussion as to why it
should be treated in that manner, that is more important than the right answer.
Because of my exposure to the Singapore environment and I am
fully aware of their compliance with the International Accounting Practices
where the GST receivable is allowed to be net off from GST payable. Therefore
it should be regarded as an asset, as explained below :
Why is GST
receivable an asset?
Generally,
GST receivable is regarded as an Asset because it will later be received from
the Tax authority in the form of cash. As such, GST receivable is being debited
as current asset when a business purchases taxable merchandise. By subtracting
GST receivable from GST payable (received as a result of providing taxable
merchandise/services to a customer), we will get the amount that is owed by the
Inland Revenue.
However, sales revenue normally are greater than purchases, thus the GST
Payable will be much larger than the GST Receivable, therefore the net result
will be a GST Payable. Only the net GST Payable or net GST Receivable will
be reflected on a balance sheet accordingly.
It
is interesting to note that it is not applicable in Malaysian context. This is
because GST Receivable is not applicable here as there will not be any GST
Receivable arising in the first place. Why I say so?. This is because GST
imposed on taxable merchandise purchases are NOT allowed to net off from the
GST payable in according to its Statutory Legislation. It is its peculiar
treatment which is not in harmony with GAAP practices in other parts of the
World. As a result, it is Not an asset, but to expense out in its Profit and
Loss Accounts.
Perhaps, it is the time Now for our Malaysian regulatory authorities to revisit
this piece of legislation and amend it accordingly so as to harmonise with the
International Accounting Practices so as to avoid any confusion in this aspect.
At the same time it will not add any additional burden to its consumers who are
already suffering with high inflation.
In summary, it is safe for me to conclude that the answer to the above question
depends very much on its Statutory Legislation and Practices in that particular
country.
With the above, I trust I have answered the question with clarity. Please do
let us know which other countries have adopted and practised similar procedures
as Malaysia in the comments below.
Thanks and look forward to seeing you again,
