Defferment of sales Tax
This query is : Resolved
12 September 2009
sirs,
Treatment of Defferment of Sales Tax , whether paid to be expensed in P& L A/c ????
Treatment of Defferment of Sales Tax , whether paid to be expensed in P& L A/c ????
13 September 2009
You can transfer the defferment of sales tax payable separate account ST defferment account & payment can be adj to this account
also keep the defferment tax in same sales tax payable account annexure should prepared break up of sales tax payable. can deside based priod of defferment
As it payable account no quetion of Dr to P & L
also keep the defferment tax in same sales tax payable account annexure should prepared break up of sales tax payable. can deside based priod of defferment
As it payable account no quetion of Dr to P & L
14 September 2009
sir,
Specifically in our case , Rs.1.33 lacs was d opening balance of deffered sales tax & furthur in F.Y.2008-09 Rs.6.15 lakhs pertaining to last year was bought in books , out of total Rs.7.48 lakhs ,Rs.3.90 lakhs was paid during the year 2008-09 , hence can we debit Rs. 3.90 lakhs to P&L a/c in 2008-09 , since as per circular no.674 dated dec 29th 1993 , & as per sec 43B oF INCOME TAX ACT 1961 ,in which CBDT SAID amount of sales tax liability converted into loan is allowed as deduction for the previous year in which conversion was permitted under Govt orders.
Specifically in our case , Rs.1.33 lacs was d opening balance of deffered sales tax & furthur in F.Y.2008-09 Rs.6.15 lakhs pertaining to last year was bought in books , out of total Rs.7.48 lakhs ,Rs.3.90 lakhs was paid during the year 2008-09 , hence can we debit Rs. 3.90 lakhs to P&L a/c in 2008-09 , since as per circular no.674 dated dec 29th 1993 , & as per sec 43B oF INCOME TAX ACT 1961 ,in which CBDT SAID amount of sales tax liability converted into loan is allowed as deduction for the previous year in which conversion was permitted under Govt orders.
20 July 2024
In the context of deferred sales tax, the treatment in the financial statements, particularly regarding the expenses in the Profit and Loss Account (P&L A/c), depends on the specific nature of the deferred sales tax and the applicable accounting standards. Here’s a detailed explanation:
### Treatment of Deferred Sales Tax:
1. **Nature of Deferred Sales Tax:**
- Deferred sales tax typically arises when sales tax payable on sales transactions is deferred to a future period, often due to government incentives or regulations.
2. **Accounting Treatment:**
- **Recognition:** Initially, the deferred sales tax liability is recognized when the sales transaction occurs, but the actual payment is deferred to a future period.
- **Measurement:** The liability is measured at the amount of sales tax payable on the transaction, based on the prevailing tax rate.
- **Subsequent Payments:** When payments are made against the deferred sales tax liability, these payments reduce the liability and are expensed in the Profit and Loss Account unless specific criteria under accounting standards suggest capitalization.
3. **Specific Case:**
- In your case, you have a deferred sales tax liability balance of Rs. 1.33 lakhs as opening balance.
- During FY 2008-09, an additional Rs. 6.15 lakhs pertaining to the previous year was brought into books, making a total of Rs. 7.48 lakhs.
- Out of this total, Rs. 3.90 lakhs was paid during FY 2008-09.
4. **Treatment in P&L Account:**
- As per the CBDT circular no. 674 dated December 29th, 1993, and section 43B of the Income Tax Act, 1961, sales tax liability converted into a loan is allowed as a deduction for the previous year in which conversion was permitted under government orders.
- The amount of Rs. 3.90 lakhs paid during FY 2008-09 can be debited to the Profit and Loss Account as an expense, provided it meets the criteria under section 43B (which generally requires actual payment before the due date of filing the income tax return).
- This payment would reduce the deferred sales tax liability on the balance sheet.
5. **Disclosure and Compliance:**
- Ensure proper disclosure of the deferred sales tax liability and the related payments in the financial statements, including any notes explaining the treatment as per the CBDT circular and relevant tax laws.
- Compliance with section 43B is critical to claim the deduction in the Profit and Loss Account. Payments must be made within the due dates specified under the Income Tax Act.
### Conclusion:
Based on the information provided and the applicable circular and tax laws, the payment of Rs. 3.90 lakhs towards the deferred sales tax liability during FY 2008-09 can indeed be expensed in the Profit and Loss Account, subject to compliance with section 43B of the Income Tax Act. Ensure proper documentation and disclosure in your financial statements to support this treatment. If you have specific doubts or require further clarification, consulting with a qualified accountant or tax advisor would be advisable.
### Treatment of Deferred Sales Tax:
1. **Nature of Deferred Sales Tax:**
- Deferred sales tax typically arises when sales tax payable on sales transactions is deferred to a future period, often due to government incentives or regulations.
2. **Accounting Treatment:**
- **Recognition:** Initially, the deferred sales tax liability is recognized when the sales transaction occurs, but the actual payment is deferred to a future period.
- **Measurement:** The liability is measured at the amount of sales tax payable on the transaction, based on the prevailing tax rate.
- **Subsequent Payments:** When payments are made against the deferred sales tax liability, these payments reduce the liability and are expensed in the Profit and Loss Account unless specific criteria under accounting standards suggest capitalization.
3. **Specific Case:**
- In your case, you have a deferred sales tax liability balance of Rs. 1.33 lakhs as opening balance.
- During FY 2008-09, an additional Rs. 6.15 lakhs pertaining to the previous year was brought into books, making a total of Rs. 7.48 lakhs.
- Out of this total, Rs. 3.90 lakhs was paid during FY 2008-09.
4. **Treatment in P&L Account:**
- As per the CBDT circular no. 674 dated December 29th, 1993, and section 43B of the Income Tax Act, 1961, sales tax liability converted into a loan is allowed as a deduction for the previous year in which conversion was permitted under government orders.
- The amount of Rs. 3.90 lakhs paid during FY 2008-09 can be debited to the Profit and Loss Account as an expense, provided it meets the criteria under section 43B (which generally requires actual payment before the due date of filing the income tax return).
- This payment would reduce the deferred sales tax liability on the balance sheet.
5. **Disclosure and Compliance:**
- Ensure proper disclosure of the deferred sales tax liability and the related payments in the financial statements, including any notes explaining the treatment as per the CBDT circular and relevant tax laws.
- Compliance with section 43B is critical to claim the deduction in the Profit and Loss Account. Payments must be made within the due dates specified under the Income Tax Act.
### Conclusion:
Based on the information provided and the applicable circular and tax laws, the payment of Rs. 3.90 lakhs towards the deferred sales tax liability during FY 2008-09 can indeed be expensed in the Profit and Loss Account, subject to compliance with section 43B of the Income Tax Act. Ensure proper documentation and disclosure in your financial statements to support this treatment. If you have specific doubts or require further clarification, consulting with a qualified accountant or tax advisor would be advisable.
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