16 December 2009
Excise, Customs and Service Tax are administered by the Central Government while VAT is administered by the respective State Governments. Thus, input credit of Excise, Service tax and Customs is not available against output of VAT. Input credit of CST is never available. But you can take the cenvat credit of excise in Service tax and vice-versa. Further, you can take the credit of VAT under CST.
01 August 2024
Excise duty on purchases is generally treated as follows:
### **1. **Excise Duty on Purchases:**
**Excise Duty Treatment:** - **For Goods Produced or Manufactured:** - **Excise Duty on Purchases:** When you purchase goods, excise duty is often included in the purchase price. If you are dealing with goods that attract excise duty (e.g., in manufacturing sectors), the duty paid is usually added to the cost of goods purchased and capitalized accordingly. - **P&L Account Treatment:** Excise duty paid on purchases should not be directly charged to the Profit & Loss (P&L) Account. Instead, it is typically added to the cost of goods or inventory. This ensures that the cost of goods reflects the full cost, including excise duty, which is then recognized in the P&L account when the goods are sold.
**For Goods in Transit or Exempt Goods:** - **Capitalization:** If the excise duty is paid on capital goods (e.g., machinery), it is capitalized as part of the cost of the asset and depreciated over its useful life. - **Not Directly in P&L:** Excise duty on capital goods or exempt goods is generally not directly expensed in the P&L account but is capitalized.
### **2. Accounting Entries:**
- **Purchases:** - **Debit:** Purchases or Inventory Account (including excise duty) - **Credit:** Accounts Payable or Bank Account
- **Capital Goods:** - **Debit:** Capital Goods Account (including excise duty) - **Credit:** Accounts Payable or Bank Account
- **Excise Duty Paid (if deductible):** - For manufacturers or businesses where excise duty is recoverable, it might be recorded as an input credit in the Excise Duty Input Credit Account or similar.
### **3. Impact on Financial Statements:**
- **Profit & Loss Account:** The cost of goods sold (COGS) in the P&L account will reflect the purchase cost, including excise duty, when the goods are sold. - **Balance Sheet:** Capitalized excise duty on capital goods appears in the fixed assets section of the balance sheet.
### **Summary:** - Excise duty on purchases is typically capitalized and added to the cost of inventory or fixed assets rather than being directly charged to the P&L account. - It ensures accurate representation of the cost of goods and assets in financial statements.
If you are handling excise duty for specific scenarios or industries, make sure to follow the relevant accounting standards and tax regulations applicable to your business.
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