Sales Tax Refund, Accounting - Auditing

[Mathurthi RamKumar]

Greeting to all,

We received sales tax refund from state government paid in 3 years back.(actually it paid for machinery purchase) I want to know hw to accounting for above. Any Income Tax rules to be noted for this?

Kindly guide me.

Regards

M.RamKumar

Posts / Replies

[MARIAPPAN GOVINDARAJAN]

In my opinion you might have booked the sales tax paid as expenditure and when it gets refunded it would be treated as income.

[Ganeshan Kalyani]

When sales tax was paid you would have accounted as - 1) Vat paid a/c (P&L) Dr.to Bank a/c 2) to transfer this amount to Current asset - other taxes recoverable a/c Dr. To Vat paid a/c. 3) when you have received the refund - Bank a/c Dr. To other taxes recoverable a/c. Like you may drawdraw your conclusion how to account the refund.