accounting of service tax refundable, Income Tax

[ANAND GUPTA]

The company is an exporter and being an exporter Service tax, VAT etc are refundable to it. The company shows Service Tax / VAT refundable under current assets. The company has not received major portion of its refunds and huge amount has accumulated under the head service Tax / VAT refundable.

Now the company wants to change the accounting ST / VAT. It will debit the expenses including service tax to its PL A/c. On receipt of refund the amount will be credited to income.

Is it an allowable accounting policy?

Can a company debit to PL A/c its refundable Service Tax / VAT to PL A/c and credit to PL A/c on receipt of refund.

Pls. reply.

Posts / Replies

[CA GOPALJI AGRAWAL]

No, it would violate the principles of accrual.

[Ramesh Kothari]

in opinion no because its current assets of the co. hence u can not charge it to P&L account if do so it will be disallowed by IT

Refund from the dept is different issue. You must hv to show in current assets column

Ramesh Kothari