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Treatment of GST component on Debt Collection Fees deducted from Recovered funds

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Summary:

Hi, I have a situation whereby a debt collection agency was engaged to recover fees from a customer. The original fee was not a taxable supply, therefore no GST was on the transaction.

When the debt collection agency recovered the fee and remitted it to the bank account, they had deducted their fees from the initial amount, which is a taxable supply. Thereby leaving a balance outstanding on the debtor account.

We had tried to create an adjustment via Receivables -> Manage Transactions to write off the balance, but as the outstanding amount subject to GST, the tax treatment of the balance is incorrect with no input tax credits.

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