Icds 2 - inventory

This query is : Resolved

Roshan (Querist)
Follow

25 October 2017 Good Day!!

My query is in relation to Valuation of Inventory as per ICDS 2.

Example:
I am following Exclusive method of accounting

Current Year Data :
State Tax assumed to be at 10%

Opening Stock [1000 unit] - 50,000 + Tax on it - 5,000
Purchases [2000 unit] - 1,00,000 + Tax on it 10,000
Sales with 20 % Margin on Cost price [1500 unit] - 90,000 + Tax on it 9,000
Closing Stock [1500 unit] valued @ Cost - 75,000 + Tax on it 7,500

Gross Profit excluding taxes - 15,000

No Opening ITC available as per books of accounts

Now referring to Section 145 A and ICDS 2, I need to Compute my profit by valuing my purchase, sales and Inventory including taxes, Also ICDS 2 says that "NO CHANGE IN VALUATION NEEDED IN OPENING STOCK"

So considering example mentioned above and giving effect to ICDS

GP - 15,000
Add:
Tax on Sales - 9,000
Tax on Closing Stk - 7,500

Less:
Tax on Purchases - 10,000

Total profit chargable 2Tax 21,500

As per Institute guidance on Income Tax audit - Referring Para 23.23 - The tax on revenue will be neutral.

Can any body guide me on it and whether I had rightly calculated the profit as per ICDS 2 requirement

Thanks in Advance

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
Follow

25 October 2017 Gross profit - 15,000

Add: tax on sales - 9,000
Add. tax on Cl.stock - 7,500
Add: Tax reversal on Op. Stock - 5,000
Add: Tax reversal on purchases
(10,000-9000) - 1000

Less: Tax on op.stock - 5,000
Less: tax on purchase - 10,000
Less: tax reversal on Cl stock - 7,500

Gross profit - 15,000

Message likes : 1 times

Roshan

Roshan (Querist)
Follow

25 October 2017 At First, Thank You sir for the reply. My doubt is why we should reduce the tax on Cl Stock and adding the tax reversal on purchase

Roshan

Roshan (Querist)
Follow

25 October 2017 Since ICDS 2 say to value inventory including taxes