Why we don't include vat as part of cost.
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
02 August 2011
WHILE PREPARING VALUATION OF CLOSING STOCK OF MANUFACTURING CONCERN..WE TAKE EXCISE DUTY AS PART OF COST...WHY WE DON'T INCLUDE VAT AS PART OF COST....SAME CASE IS HAPPENED WITH CENTRAL SALES TAX...WE TAKE IT AS PART OF COST...VAT????
02 August 2011
This is because we get the set-off of VAT so we dont include it in valuation. In case of CST, we dont get any set-off so we include it in valuation. Refer AS-2 on Valuation of Inventories. You'll get the clarification.
"All the duties and taxes which are not otherwise recoverable from the government should be added in inventory costs"
"All the duties and taxes which are not otherwise recoverable from the government should be added in inventory costs"
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02 August 2011
VAT is not a revenue item. It is a capital item.
When we collect VAT from our purchasers, it is our liability as we have to deposit the same to the Govt.
From this VAT liability, we deduct the VAT already paid by us on our purchases.
So nothing is going from our pocket.
When you are collecting VAT on sales you have to deposit it to the Govt.
And when you have already paid VAT on purchases, its credit is available from the amount payable.
When we collect VAT from our purchasers, it is our liability as we have to deposit the same to the Govt.
From this VAT liability, we deduct the VAT already paid by us on our purchases.
So nothing is going from our pocket.
When you are collecting VAT on sales you have to deposit it to the Govt.
And when you have already paid VAT on purchases, its credit is available from the amount payable.
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