Accounting for VAT - Chartered Accountants Institute ready with guidance note

By Vijay Kumar

Institute of Chartered Accountants of India (ICAI) is shortly to release a guidance note on Accounting for VAT. The note stipulates that

• the input tax paid on purchase of inputs/capital goods which is available as VAT credit should not be included in the cost of purchase

• VAT credit which will be available in future on the goods lying in stock at the inception of the VAT scheme should be credited to the Opening Stock A/c at the inception of the scheme itself.

• VAT payable on sales is an indirect tax which is ultimately borne by the final consumer

• The dealers collects VAT from their customers on behalf of the VAT authorities

• VAT collected from the customers should not be recognised as an income of the enterprise, i.e., it should not be included in the sales

• payment of VAT should not be treated as an expense in the financial statements of the enterprise.