How do I reduce the tax liability in GST/HST return when invoices are written-off?

When you write-off an invoice in which GST/HST is applied, the total amount of the invoice is debited to the Bad Debt account. However, the tax liability does not get reduced in the GST/HST Return.

In Zoho Books, you can directly adjust the tax amount in Line 103 / Line 104 / Line 107 to reclaim tax on written-off invoices.

You can make adjustments only when the HST/GST Return is in draft status. No adjustments can be made after the Return has been filed.

Let’s say, you write-off an invoice in the same tax period, in which the tax collected for the invoice is liable to be paid to the Canada Revenue Agency. Then, you can directly adjust (reduce) the Line 103 amount. Please follow the steps mentioned below to adjust (reduce) the Line 103 amount in GST/HST Return:

• Select the appropriate GST/HST Return.
• Click the Adjust link at the end of the Line 103.
• Select the invoice written-off date in the Date field.
• Enter the tax amount of the written-off invoice in negative (since we don’t need to report it to the Canada Revenue Agency).
• Select Bad Debt account in the Account field.
• Enter the Reason and hit Save.

If you write-off an invoice after the tax for the invoice has been reported to the Canada Revenue Agency, you need to adjust the Line 107 amount in GST/HST Return for the current tax period. Please follow the steps mentioned below to adjust the Line 107 amount in GST/HST Return:

• Select the respective GST/HST Return.
• Click the Adjust link at the end of the Line 107. (since we already reported this amount to the Canada Revenue Agency, we must adjust the amount in Line 107)
• Select the invoice written-off date in the Date field.
• Enter the tax amount of the written-off invoice.
• Select Bad Debt account in the Account field.
• Enter the Reason and hit Save.

Now, check your reports and the Bad Debt account will be credited and the Tax Payable account will be debited.