Query abuot inclusion of vat in determining turnover for aud
This query is : Resolved
24 September 2011
As there are some supreme court rulings where it is held that VAT is 'INTEGRAL' part of sale and is to be included in turnover. But as per guidelines issued by ICAI Where the tax paid on inputs is available
for set-off against the tax payable on sales or is refundable, it is in the
nature of taxes recoverable from taxing authorities. The Accounting
Standard (AS) 2 “Valuation of Inventories” issued by the ICAI deals with
“cost of inventories” and “cost of purchases”. As per para 6 and 7 of the said
AS-2, the cost of purchases cannot include duties and the taxes which are
subsequently recoverable from the taxing authorities. Hence the input tax
which is refundable, should not be included in the cost of purchases.Similarly VAT is collected from the customers on behalf of the VAT authorities and,
therefore, its collection from the customers is not an economic benefit for
the enterprise. It does not result in any increase in the equity of the
enterprise so it not to be included in turnover. Please let me know your views on this issue.
for set-off against the tax payable on sales or is refundable, it is in the
nature of taxes recoverable from taxing authorities. The Accounting
Standard (AS) 2 “Valuation of Inventories” issued by the ICAI deals with
“cost of inventories” and “cost of purchases”. As per para 6 and 7 of the said
AS-2, the cost of purchases cannot include duties and the taxes which are
subsequently recoverable from the taxing authorities. Hence the input tax
which is refundable, should not be included in the cost of purchases.Similarly VAT is collected from the customers on behalf of the VAT authorities and,
therefore, its collection from the customers is not an economic benefit for
the enterprise. It does not result in any increase in the equity of the
enterprise so it not to be included in turnover. Please let me know your views on this issue.
24 September 2011
I follow the ICAI guidance.
24 September 2011
for collection of VAT you are the agent of the Government and you are also permitted to adjust the VAT collected against payment then how come it is forming part of purchases. Previously when the sales tax rules were there then it was applicable but after introduction of VAT it is not applicable and ICAI has correctly given the guidelines.
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