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
CAclubindia
