Rounding and Tax Invoice Layouts

AA-05432

There has been many inquiries with regards to GST and rounding, its impact on invoices. Sage would like to share our information to clarify these queries.

Why does rounding exists?

The GST rate is Malaysia is currently 6% and the pricing of goods and services in principle can take any form or price dictated by the supplier. In the instance that the price is a number that does not multiply into a perfect number with 2 decimal places, it will need to be rounded as we do not trade beyond 2 decimal places in the Malaysian currency. Take this example.

Unit price of item A is RM 2.05 inclusive of GST and 3 units are sold. Therefore the calculated amount would be 

  • RM 2.05 X 3 = RM 6.15
  • GST (inclusive) would then be 6/106 X 6.15 = 0.369 which is then rounded to 0.37, 2 decimal places. 
  • The breakdown would then be Net Price (without GST) of RM 5,78 and GST charged of RM 0.37

What is a total?

The total in an invoice is a simple summation of identified values, no more, no less and definitely not any scientific rounding theories that many are trying to convince software users. 1 + 1 =2, that is the function of a total field.

Due to the fact of the simplicity it cannot be used as a definite benchmark for correctness. The following factors will support this conclusion in a practical scenario.

  1. Not all products may be subjected to the same GST treatment or percentage, Therefore applying a simple treatment i.e. 6% on a total will not yield the expected results.
  2. They may be differences in rounding. Therefore trying to calculate a definite 6% on a total will also not yield necessary the correct results as the calculation is done per line.

Therefore, our conclusion, keep the total a simple function as it has always been, a sum of selected values. For example, total of discounts, total of net price and of course total of tax payable.

How does Sage handle GST and rounding?

In reviewing the requirement from JKDM, any calculation or record should be as detailed as possible to aim for correctness and accuracy. Therefore in Sage products, we handle the GST calculation by detailed lines, this is in alignment with the GST Audit File (GAF) which is detailed by line. It may be a line of item in the invoice or a line in your receipt. 

The question will definitely arise, why in the detailed line? The key reason is that the particular transaction line should be able to stand by itself and be correct, and not adjusted because it is part of a total invoice. What happens if subsequently other items are removed or recalculated? Thence it will deem the current line inaccurate.

Refer to the example below. 


Is the correct GST amount 2.36 or 2.37? Let's look at another example.


This example further illustrates our position. Once there is a mixed supply or treatment, (standard and zero rated) the total is not reliable for simplistic analysis. (52.44 X 6% is not equal to 2.37) However, we should still remember the simple fact, a total is just a summation.

Therefore the correct answer to the 1st invoice is RM 2.37

Why are there errors in my Sage printout of invoices?

When GST was first rolled out there were 2 conditions that we faced with users of our products.

  1. They were using the standard layouts for invoices etc. from Sage products.
  2. They were using personalized layouts for invoices etc. that were created prior or even post GST. 

The result  of this was confusion and uncertainty as some of the layouts did not cater fully to the varied implementations and there was little understanding on the rounding impact. Sage acknowledges this and has quickly rendered further assistance to the users.

There is no possible way for Sage to address all the personalized layouts in the market, as there are thousands upon thousand of them, however we have in our effort offered for the market 2 choices.

  1. We have opened up and made available the layout/report designer to the users and provided some simple tutorial for the users to modify the layout on their own. Whilst this can become a bit technical, the user has the choice to manage the situation themselves and be empowered in the process.
  2. We have updated and increased the number of available layouts in our products with each progressive release. The total of available layout now numbers well above 20 types, for users to choose from. However, it has to be practical that we are not able to cater for every specific need. We try to achieve the best balance between practical usage and customer demand while providing the facilities for users to further explore and modify if they want to.

Please look out for the latest releases and the layouts that meet your requirements, and if they don't, create your own style and requirements. 

Bank Negara Rounding

This rounding mechanism suggests that the total bill (including GST) be rounded upwards or downwards to the nearest multiple of 5 sen. The illustration of this is as follow.

  • Amounts ending with 1,2 will round down.
  • Amounts ending with 6,7 will round down.
  • Amounts ending with 3, 4 will round up.
  • Amounts ending with 8,9 will round up.

This is usually applied in retail situations where cash (legal tender) is used. This setting can be enabled in the settings of Sage products. 

Contribution from Ng Wan Hua