GST Charged Incorrectly?
by Peggy
(Alberta, Canada)
Contra Payment Made on Sales Invoice
My client is a corporation. He is the only shareholder/director.
On a few of his bills that he sent out, he deducted some money that he owed the client for gasoline. Then he charged 5% GST on the reduced amount. This makes his GST charged less than it should be.
I have posted his invoices the way they were provided to me. When it's time to file his GST return, the revenue amount x 5% will not equal the GST charged. How would I make an adjustment for this?
Hi Peggy,
Hmmm. The gas is really a contra payment. Sales tax should have been charged on the gross amount. You should have a payable for the amount of gas owing where you are claiming the ITC. When you apply the contra payment to the sales invoice, your offset is the payable.
I would be tempted to restate the invoice but not send it to the customer if your boss feels his way is "correct". (Make sure a really good memo note is included about what you are doing and why) and write-off the amount that you will be short when the customer pays the account. This way your GST reporting is still accurate and correct.
Remember, when you write-off a bad debt, you must prorate the applicable amount of sales tax too.
P.S. I would like to remind you there is a difference between information and advice. The general information provided in this post or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using this site content for any reason whatsoever.
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