VAT Input Credit When Output is Nil

This query is : Resolved

Aditi (Querist)
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25 November 2010 This is a Case of Private Limited Company.
The Company is a construction company and has started the work on site last month. Since the Flats that shall be constructed shall be sold later, so their is no VAT liability on Output.
The company therefore shall pay Output Tax by taking 8-10 % margin over the Purchase made.
Now VAT Input a/c shall be opened in Current Assets (Duties & Taxes)

On Purchase

Purchase Dr
Vat input Dr
Cash/Bank/Creditor Cr

At the end of quarter Tax Payment shall be made

Transfer Input to VAT Payable
Vat Payable Dr
Vat Input Cr (with amount o/s in this a/c)

& the amount further paid being 8-9 % is also debited in Vat Payable which is also paid off

Vat Payable Dr
Bank/Cash Cr
My Question is where we will show this VAT Payable since logically its the part of my Purchase Cost

Hitender Gaur

Hitender Gaur (Expert)
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26 November 2010 Aditi clear wheter co. is constrcution or builder and promoter, also specify the state of business.

Aditi

Aditi (Querist)
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29 November 2010 Dear Sir.. the Company is construction company .. i.e. it shall build row house, apartment etc and sell.
the state of business as of now is that work has just started on site.

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Hitender Gaur

Hitender Gaur (Expert)
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29 November 2010 Output VAT is your Liability and Input Vat is Your Assets in Accounting, Output Vat is Payable in the end of Tax period. Till then you have to treat In put VAT as your assets while it is the part of your purchase. In the end of Tax Period Pass the following entry

Output VAT A/c. Dr.
To Input Vat A/c

If Your Output Vat is more then Input Vat then at the time of making further payment Output VAT (you can say VAT Payable)

Output VAT A/c. Dr.
To Cash/Bank A/c.

But if Your Input Tax is excess then Output Vat , it will be carry forward to next Tax Period and adjusted in your next Sales Tax Return till then it will be treated as your assets.

Aditi, there is a difference between Contractor and Builder Company in VAT, If a contractor is constructing some ones flat/building then in VAT he covered in Work Contract and Employer will deduct and deposit the appropriate % of VAT TDS and release the appropriate FORM to Contractor, But If some one is purchasing land and constructing flats/building from his own resources and selling these flats also, then in VAT there is different type of Tax liability (VAT) computing system which is very state to state. Kindly go through all the fact of you state of business.

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