Accrued liabilities

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When preparing financial statements, the inclusion of GST in accrued liabilities depends on your Input Tax Credit (ITC) eligibility. If you can claim ITC, the liability should be recognised net of GST. However, if the invoice hasn't been received and GST credit cannot yet be claimed, it's generally best practice to recognise the full gross amount to present a true and fair view of the business's financial position.

Swati

Swati (Querist)
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09 April 2020 Hi,

Should accrued liabilities while preparing financials where invoices have not been received yet include GST?

CA Suresh Jain

CA Suresh Jain (Expert)
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10 April 2020 If you are eligible for ITC then the accrued liability should be recognised net of GST else the gross amount should be recognised.

Eswar Reddy S

Eswar Reddy S (Expert)
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17 April 2020 Check the GSTR-2A . If the counter party has sent GST through GSTR-2A ,you can get invoice details. So you should Account for the accrued liabilities..

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)
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05 May 2020 I think the amount needs to be taken is inclusive of any GST as the amount of GST on the invoice is also a liability for us to pay as and when presented and when we are preparing Financial Statements it is better to have full picture so as to have a true and fair view of the financial positions of the business organisation as on a particular date. Excluding GST amount will not represent a true, fair and proper position of the business organisations.

CA Suresh Jain

CA Suresh Jain (Expert)
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13 May 2020 @Asha Kanta Sharma - You are right to say that the liability to pay to supplier is for Gross amount inclusive of GST. But provision for expenses is made for stating correct Profit/ Loss. The GST liability is not an expenditure as it can be availed as ITC. Secondly GST credit can not be availed and accounted for until inter alia two conditions are fulfilled i.e. 1. the goods or services have been received and 2. the invoice for the same is received
It may be appreciated that the provision is made only where second condition is not fulfilled and therefore neither the GST can be recognised as expenditure nor the ITC could be recognised.

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