Sales tax paid accounting treatment

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

04 April 2012 Please guide me to resolve query?

I have seen some tax audit report in which sales tax paid is shown as expense in P&L A/c. whereas in some tax audit report it is not shown in P&L A/c.

Please tell which is the correct one.

CA CS Pawan Jajoo

CA CS Pawan Jajoo (Expert)
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04 April 2012 Sales tax is not our expense. It is to be collected from customer and is to be deposited to State Govt, after adjusting input VAT.So it should not appear in P and L account

Sometimes there is interest payment on late payment of VAT and CST Tax, Penalty is Paid for non filing of return, Sometimes setoff is wrongly taken, then and there only it will appear in Profit and Loss account...

CA Kishore Tallam

CA Kishore Tallam (Expert)
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04 April 2012 Both are correct.
Some companies pay sales tax on their purchases and does not have any output sales tax liability. In such cases, the sales tax paid is charged off to P&L either by showing as "sales tax" or grouping it under respective head of expenditure.

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C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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04 April 2012 Sales Tax on Purchases is included in the cost of purchase and similarly the gross value of sales including sales are shown in the profit and loss account against which the sales tax is debited to the P & L A/c. This was applicable when sales tax was not allowed as set off. Now, since concept of VAT is applicable where you adjust VAT collected against VAT paid then it is not to be shown in P & L A/c and the net value of the VAT is paid to the Govt. against collection on behalf of the Government

Querist : Anonymous

Querist : Anonymous (Querist)

04 April 2012 Thanks to Mr. Kishore & Mr. Pawan

So what about the Audit Report in which auditor showing Sales Tax exp & they are taking credit of the same.

I think they are doing mistake by not setoff the same from o/p sales tax liability.

Prakash Kochar

Prakash Kochar (Expert)
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09 April 2012 Under Composition Scheme other than WCT, dealer is not allowed to collect VAT seperately. Similarly In case of wine dealers they were liable to pay VAT on MRP value, where VAT collection was less than VAT Payable on sale. Under the circumstances how to take entries for differential vat paid or paid by dealer following composition scheme. (Mah. VAT Act)