Sales Tax on Bad Debts

[khizar]

Hi

Say I billed a client for Rs 100,000 plus the 15% GST = 115,000.
Over the next 4 months he paid Rs 105,000. Balance of 10,000 is unpaid, claiming that there were some rejections / incorrect rates etc.

I guess the 2 options are
1) Issue a credit note for Rs 10,000 (incl of GST)
2) Bad debts of Rs 10,000.

If we treat it as bad debt, will the total 10,000 be shown as expense. Or just the revenue portion, balance crediting GST?
And to justify the bad debt, are any documents / proofs required?

Is it true that credit notes cannot be issued after 90 days for any invoice?

Thanks

[massood akhter]

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Hi

Say I billed a client for Rs 100,000 plus the 15% GST = 115,000.
Over the next 4 months he paid Rs 105,000. Balance of 10,000 is unpaid, claiming that there were some rejections / incorrect rates etc.

I guess the 2 options are
1) Issue a credit note for Rs 10,000 (incl of GST)
2) Bad debts of Rs 10,000.

If we treat it as bad debt, will the total 10,000 be shown as expense. Or just the revenue portion, balance crediting GST?
And to justify the bad debt, are any documents / proofs required?

Is it true that credit notes cannot be issued after 90 days for any invoice?

Thanks



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AOA,

Dear Khizar,

in my opinion the option no. 2 is relevent in this case, because previously when you have issued invoice =100,000+15,000=115,000 which means the value of Rs. 100,000 is the value of supply excluding sales tax 2(46). secondly there is also a time limit as prescribed in the 'THE DEBIT AND CREDIT NOTE AND DESTRUCTION OF GOODS RULES, 1996' which is ninty days, however the collector may at the request of the supplier extend the period from ninty days to 180 days.

you can not simply issue crdit note after four months due the reason as you mentioned that incorrect rate, which does not happen in practice.

best of luck/

massood ar.