High sea sales
This query is : Resolved
20 February 2013
Dear ALL,
I would Like to know about how to deal during the audit in case of dealer is purchasing goods from singapore and selling it to dubai before entering the goods in India.
I would Like to know about how to deal during the audit in case of dealer is purchasing goods from singapore and selling it to dubai before entering the goods in India.
07 March 2013
tally will bill of entry No. as well as CBEC exchange Rate of import.
export
tally with date of shipping bill as well as Exchange rate
must check
1. EXPORT SALES CONTRACT
2. IMPORT SALES CONTRACT
3.LETTER OF CREDIT
4.CALCULATION OF INSURANCE&FREIGHT, FOB AND CIF TOO.
export
tally with date of shipping bill as well as Exchange rate
must check
1. EXPORT SALES CONTRACT
2. IMPORT SALES CONTRACT
3.LETTER OF CREDIT
4.CALCULATION OF INSURANCE&FREIGHT, FOB AND CIF TOO.
Message likes :
1 times
20 July 2015
Thank you For your response.
Further more how to deal with the profit or loss on such sale.
Further more how to deal with the profit or loss on such sale.
28 July 2024
When dealing with an audit scenario where a dealer purchases goods from Singapore and sells them to Dubai before entering the goods into India, several key considerations must be addressed. This involves understanding the treatment of international transactions, compliance with tax laws, and the proper handling of profit or loss arising from such transactions. Here’s a detailed guide on how to approach this situation:
### **1. Understanding the Scenario**
In this case:
- **Purchase**: Goods are purchased from Singapore.
- **Sale**: Goods are sold to Dubai.
- **Entry into India**: Goods are not brought into India.
### **2. Key Considerations**
#### **a. Import/Export Compliance**
- **Documentation**: Ensure that all relevant documentation is in order. This includes purchase invoices from Singapore, sales invoices to Dubai, and shipping documents.
- **Customs**: Since the goods are not entering India, there should be no import customs duty or VAT/IGST liability on the goods entering India. However, you need to maintain clear evidence of the transaction being international to justify that the goods never physically entered India.
#### **b. Profit and Loss Treatment**
- **Profit or Loss Calculation**: Calculate the profit or loss on the sale by comparing the purchase cost from Singapore with the sale price in Dubai. The calculation should include:
- **Purchase Cost**: Cost of goods bought from Singapore.
- **Sale Price**: Revenue received from selling goods in Dubai.
- **Expenses**: Any additional expenses incurred for shipping, insurance, or other transaction-related costs.
- **Example Calculation**:
- **Purchase Cost**: $50,000 (from Singapore)
- **Sale Price**: $55,000 (to Dubai)
- **Expenses**: $2,000 (shipping, insurance, etc.)
- **Profit**: $55,000 (Sale Price) - $50,000 (Purchase Cost) - $2,000 (Expenses) = $3,000
#### **c. Accounting Treatment**
- **Recording the Transaction**:
- Record the purchase in the books as an international purchase, noting that the goods are sold before entry into India.
- Record the sale in Dubai as export sales, and ensure to document that the goods never entered India.
- **Accounting Entries**:
- **Purchase Entry**:
- Debit: Purchases/Stock (for the cost of goods purchased)
- Credit: Accounts Payable (for the amount due to Singapore supplier)
- **Sale Entry**:
- Debit: Accounts Receivable (for the amount receivable from Dubai customer)
- Credit: Sales (for the revenue from Dubai sale)
- **Expense Entry** (if applicable):
- Debit: Shipping/Logistics/Other Expenses (for any related costs)
- Credit: Accounts Payable (for the payment made)
#### **d. Tax Implications**
- **GST/IGST**: Since the goods were sold outside India, there should be no GST/IGST on the sale. However, maintain documentation to prove that the goods were sold to a non-resident and did not enter India.
- **Profit Repatriation**: Ensure compliance with any regulations regarding repatriation of profits from Dubai to India, if applicable.
### **3. Dealing with the Audit**
- **Documentary Evidence**: Provide all relevant documents to the auditor, including purchase invoices, sale invoices, shipping documents, and any correspondence related to the transactions.
- **Proof of Sale**: Demonstrate that the goods were sold before entering India. This can be shown through export documents, contracts, and evidence that the goods did not physically enter the country.
- **Reconcile Transactions**: Ensure that all transactions are reconciled with the bank statements and other financial records.
### **4. Key Points to Communicate with the Auditor**
- **Nature of Transactions**: Clearly explain that the transactions involve international trade where the goods are neither imported into India nor sold within India.
- **Profit Calculation**: Provide a detailed calculation of profit or loss on the transaction and ensure it aligns with the financial statements.
- **Compliance with Laws**: Show that all transactions comply with international trade laws and tax regulations, with appropriate documentation to support the transactions.
By following these steps, you can effectively manage the audit process and ensure proper accounting and reporting of international transactions.
### **1. Understanding the Scenario**
In this case:
- **Purchase**: Goods are purchased from Singapore.
- **Sale**: Goods are sold to Dubai.
- **Entry into India**: Goods are not brought into India.
### **2. Key Considerations**
#### **a. Import/Export Compliance**
- **Documentation**: Ensure that all relevant documentation is in order. This includes purchase invoices from Singapore, sales invoices to Dubai, and shipping documents.
- **Customs**: Since the goods are not entering India, there should be no import customs duty or VAT/IGST liability on the goods entering India. However, you need to maintain clear evidence of the transaction being international to justify that the goods never physically entered India.
#### **b. Profit and Loss Treatment**
- **Profit or Loss Calculation**: Calculate the profit or loss on the sale by comparing the purchase cost from Singapore with the sale price in Dubai. The calculation should include:
- **Purchase Cost**: Cost of goods bought from Singapore.
- **Sale Price**: Revenue received from selling goods in Dubai.
- **Expenses**: Any additional expenses incurred for shipping, insurance, or other transaction-related costs.
- **Example Calculation**:
- **Purchase Cost**: $50,000 (from Singapore)
- **Sale Price**: $55,000 (to Dubai)
- **Expenses**: $2,000 (shipping, insurance, etc.)
- **Profit**: $55,000 (Sale Price) - $50,000 (Purchase Cost) - $2,000 (Expenses) = $3,000
#### **c. Accounting Treatment**
- **Recording the Transaction**:
- Record the purchase in the books as an international purchase, noting that the goods are sold before entry into India.
- Record the sale in Dubai as export sales, and ensure to document that the goods never entered India.
- **Accounting Entries**:
- **Purchase Entry**:
- Debit: Purchases/Stock (for the cost of goods purchased)
- Credit: Accounts Payable (for the amount due to Singapore supplier)
- **Sale Entry**:
- Debit: Accounts Receivable (for the amount receivable from Dubai customer)
- Credit: Sales (for the revenue from Dubai sale)
- **Expense Entry** (if applicable):
- Debit: Shipping/Logistics/Other Expenses (for any related costs)
- Credit: Accounts Payable (for the payment made)
#### **d. Tax Implications**
- **GST/IGST**: Since the goods were sold outside India, there should be no GST/IGST on the sale. However, maintain documentation to prove that the goods were sold to a non-resident and did not enter India.
- **Profit Repatriation**: Ensure compliance with any regulations regarding repatriation of profits from Dubai to India, if applicable.
### **3. Dealing with the Audit**
- **Documentary Evidence**: Provide all relevant documents to the auditor, including purchase invoices, sale invoices, shipping documents, and any correspondence related to the transactions.
- **Proof of Sale**: Demonstrate that the goods were sold before entering India. This can be shown through export documents, contracts, and evidence that the goods did not physically enter the country.
- **Reconcile Transactions**: Ensure that all transactions are reconciled with the bank statements and other financial records.
### **4. Key Points to Communicate with the Auditor**
- **Nature of Transactions**: Clearly explain that the transactions involve international trade where the goods are neither imported into India nor sold within India.
- **Profit Calculation**: Provide a detailed calculation of profit or loss on the transaction and ensure it aligns with the financial statements.
- **Compliance with Laws**: Show that all transactions comply with international trade laws and tax regulations, with appropriate documentation to support the transactions.
By following these steps, you can effectively manage the audit process and ensure proper accounting and reporting of international transactions.
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