himanshu khariwal (chartered accountants) (32 Points)
24 January 2014dear experts, our company is plan to established project in MP and as per promotion of project in backward area state govt. give subsidy in form of waived 75% of VAT liabilities of every year up to 10 years or up to project cost meet w.e. is earlier please clarify what accounting treatment of that VAT subsidy . Thanks, Himanshu
CA Saurav Somani
(CA - practice)
(7944 Points)
Replied 04 February 2014
Well the treatment is done by a company which I am auditing:
Suppose you have collected VAT on sales of Rs 100 from customer. Your input VAT on purchase is 45. Now the VAt liability is Rs 100-45=Rs 55. Now 75% of 55 is 41.25 or say 41. and the rest is Rs 14. So 14 will be a effective liability to Govt. And Rs 41 is the income (since company has collected it and retained it) so the income is transferred to P/L account. This Income is a direct income and is also taxable under income tax act 1961.
Landmark Judgments: Important Provisions of the EPF & ESI Act interpreted by the Honorable Supreme Court of India
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