We are getting VAt input credit on purchase of Raw material, and account it like under
basic amt debit to purchase a/c. vat input debit with tax amt and credit to sduppliers a/c. I think there is nothing any wrong with the accounting.
During the current year TAX audit under income tax my C.A asking and force us to merge the VAT input credit to Purchase a/c. and out put tax in sales a/c..
We argued him that Input VAt is not a acquisition cost also not a expenses on our parts and also if we are taking input credit then how we can merge it.
Please advice what is the proper system. We have given referencesof some supreme court judgement in which clearly mentioned that party can account it separately.
03 August 2009
The accounting done by you is correct and no one can force you to change it. But you have to be careful to check whether the Input credit is available in the items purchased by you. The items on which VAT credit is not present should be added to the acquisiton cost.
Otherwise your treatment is correct. If the CA persists with his attitude you can take professional advise from other CA who can give you in writing about the treatment.
CAclubindia
