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whether refund of vat taxable in IT Act

Aditya Gupta (Chartered Accountants) (37 Points)

21 March 2009

Whether refund of vat is treated as income in the income tax act

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5 Replies

Ankur Agrawal (CS, CA Final) (239 Points)
Replied 21 March 2009

sir i don't thinks so .....as VAT didn't allow as an expense....!

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(Guest)

If it was allowed as an expense earlier at the time of payment(For eg..material for which no input credit is claimed), it will be taxable.(See Sec. 41)

Else.....Exempt.

>>Vipul Garg

deepak K Gujrati (CA-practice) (966 Points)
Replied 22 March 2009

Whenever a purchase is made where VAT has been charged. Vat is debited to a seperate account i.e. Input tax credit a/c. If this amount is refunded it will just adjust the account.It has nothing to do with Expenses or income a/c.

Accounting Standard 2 issued by ICAI also requires that any tax if refundable should not be debited to purchase a/c.

Please suggest under what circumstances it will be debited in expense a/c

1 Like

CA Sakshi (CA Practice) (309 Points)
Replied 22 March 2009

VAT refund will be taxable u/s 41(1) of IT Act, 1961. VAT composition tax is debited to P&L A/c. Otherwise VAT A/c separately maintained. VAT refund can be shown as Capital A/c adjustment like Income Tax refund.