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Accounting entry

CA Janardhana Gouda (Chartered Accountant) (60 Points)

06 August 2013

whether we have to pass a provision entry for vat payable for the month of March(year end month) or not ?

Data: vat payable as per vat returns for the month of March : 50,000

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CA Pavan Sharma (Balakrishna Consulting LLP) (29 Points)
Replied 06 August 2013

Hi Janardhan,

Your question can be replied under two scenarios

1. Under the normal VAT regime - in this case, the VAT liability would have already been recognized at the time of sale. The entry would be

Debtor DR > CR. Sale > CR VAT Liability

Thus, there is no need for any other provision - except if you wish to set off the Input VAT and the Output VAT liability. In such a scenario, the entry would be

Output VAT DR > CR Input VAT > CR VAT Liability (Net)

The second entry is more of an ajustment to bring to books the net liability.

2. Under the Composition Tax regime

In this scenario, VAT is not charged at the time of sale (i.e. together with the sale invoice). Here the VAT / COT should be recognized at the end of the month as an expense to the month's PL. Thus, for the month of March 2013 (and for any other month), you have to pass a provision entry as follows

COT Expense DR > CR COT Liability

Trust this helps.

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