AA-26-20 Withholding Sales Tax Treatment

My Videos (Accounts Officer ) (677 Points)

30 June 2023  
Hi All Respected Members,

Please educate me on following:

I work in a country where we have to withhold 20% amount of total sales tax amount of purchases but 100% amount of this input ST adjust in output ST at the end of month.

I want to know that how will be accounting treatment of it ?

For example,

ST rate is 10%.

A supplier sent us an invoice Rs.110 (100 + 10) where Rs.100 is purchase value and Rs.10 is ST. he recorded the below entry in his company book of accounts:

Purchased Dr. 100

ST Receivable (Input Tax) Dr. 10

Supplier Cr. 110

Now, as per law, we have to deduct 20% ST of Rs.2 (10 x 20%) from ST value of Rs.10 and deposit it to government but 100% ST amount should be in our ST receivable account so that we can get full benefit of adjustment when we adjust it with sales tax payable account at the end of month.

Please educate, how will be the accounting treatment of it ?