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Valuation of finished goods

CA Himanshu Khurana (Chartered Accountant) (813 Points)

25 March 2013

Hello Friends

Please tell me whether Excise Duty & VAT amount will be included in NRV of finsihed goods or not?

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2 Replies

CMA Shilpa Shinde (COST ACCOUNTANT) (217 Points)
Replied 26 March 2013

Dear Himanshu Khurana,

There are 2 points to be considered 1) AS-2 & 2)Section 145A.

Point No.1) AS-2:-

NRV as given in AS-2 : Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

Additionally As per AS-2, The costs of purchase consist of the purchase price including duties and taxes (other than those subsequently recoverable by the enterprise from the taxing authorities), freight inwards and other expenditure directly attributable to the acquisition. Trade discounts, rebates, duty drawbacks and other similar items are deducted in determining the costs of purchase.

Point No.2) Section 145A :-

For Income Tax Purpose Taxes and Duties are to be included in Closing value of finished goods stock.

Excise Duty is Manufacturing Expenses so as per section 145 A included in value of closing of finished goods but, at the same time Provision for Excise Duty is also to be Created which will nullify addition of Excise duty in valution.

While VAT is at time of Sales Takes place no such provision is made.