Rohit Kalra (26 Points)
03 September 2020Hi,
I want to know the accounting entries for purchase of car battery .Can we take ITC on car battery assuming car is used for business purposes.
Can I pass this entry
Repair and maintenance. Dr
GST input Dr
To cash and bank
or
Car a/c. Dr
GST input. Dr
To Bank a/c
yasaswi gomes
(My grammar is 💯 good I)
(7290 Points)
Replied 03 September 2020
Repairs and maintenance is more appropriate in the subsequent years because if you debit car account, its value will increase. I believe spares fall under repair and maintenance. A fixed asset is capitalized along with costs involved to bring it to the current location in year 0 if it is a part of PPE and depreciated in the later years.
prasad Nilugal
(3914 Points)
Replied 03 September 2020
Online Query
(CA Final Student)
(120 Points)
Replied 03 September 2020
prasad Nilugal
( GST Practitioner & Accounts )
(14805 Points)
Replied 03 September 2020
You can not take Input Tax credit on Repair & Maintenance of Motor vehicle , as per CGST amendment act 2018 ( amendment in section 17(5) ) .
Confirm with others also .
yasaswi gomes
(My grammar is 💯 good I)
(7290 Points)
Replied 03 September 2020
@ Online Query
that occurred to me as well. In real life, I thought that the performance obligation for it is separate after initial purchase. You get an assurance or service type warranties. Leaving this, when a car is put on a resale, car is valued and people check for battery condition. They are satisfied if the battery is new and you can purchase it for low price. This can be treated as goodwill from bargain purchase(not in reality). Again, Few points I noticed:
Spare parts used for consumption of production are part of PPE. But battery is not held by the company and needs a serviceman to change it and pay for its maintenance. But in reality, I just went through PPE and your CORRECT to an extent- servicing equipment is capitalised and agreeing only after reading the separate component costs about inspection and overhaul costs.
** Example- Inspection and overhaul costs: An airplane life is 30 years, but seats and furniture only for 5 years. So, new seats and furniture is replaced and depreciated for the next t five years.
yasaswi gomes
(My grammar is 💯 good I)
(7290 Points)
Replied 01 October 2020
@ Online Query
Sorry for not updating, this inspection & overhaul is for IAS 16 only and not for IndAS. IndAS 16 includes car battery into the value of the car. When it is replaced, this separate component (old car battery value) is derecognised and the new value of car battery is capitalised into the value of fixed asset.
This is hard for year end valuations because, if one recognises it as per IAS 16, separately on the balance sheet, depreciation calculations will be more transparent.
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