Inventory Valuation for Import Purchase

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This query is : Resolved

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This discussion clarifies how to value imported inventory, specifically whether to include customs duty, freight, insurance, and other charges. The consensus is that all these costs should be capitalised and added to the basic cost of the goods when determining the closing stock value. Even if these expenses were initially charged to the Profit & Loss account, they should be reversed and included in the inventory valuation for accuracy.

Pradip vaghela

Pradip vaghela (Querist)
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21 January 2022 Imported of Machine at Rs.115000 from China and paid custom duty Rs. 15000 (As per custom Tariff) and till 31st March,2021 if we have this machine in closing stock, while doing valuation whether we shall include the custom duty or not, I have done the valuation as under ;
Cost of goods Purchase
115000 = Basic Cost
20000 = Duty Cost
6000 = Insurance & Freight (CIF)
5000 = CHA & Other charges
146000 = Total Cost

We have charged the Custom Duty, Insurance and Freight, CHS and other Import Charges to P&L already, So this all cost would be added to Inventory or not, and if yes then which cost shall be added to Machine Value at year end?

Please advice.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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22 January 2022 Reverse p and l charge and add all costs to the inventory and machine value.

Pradip vaghela

Pradip vaghela (Querist)
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24 January 2022 Sir,

This is our business to import machine, so machine is our inventory. So at time of import we are charging this expense to P&L. But in Inventory valuation, is it require to add custom duty, Freight and Insurance in basic cost value of machines?

Please guide.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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24 January 2022 Such expenses has to be capitalised to the cost of the machinery.

Pradip vaghela

Pradip vaghela (Querist)
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06 April 2022 Imported materials (Our regular trading products) at Rs.115000 from China and paid custom duty Rs. 15000 (As per custom Tariff) and till 31st March,2021 if we have this machine in closing stock, while doing valuation whether we shall include the custom duty or not, I have done the valuation as under ; Cost of goods Purchase 115000 = Basic Cost 20000 = Duty Cost 6000 = Insurance & Freight (CIF) 5000 = CHA & Other charges 146000 = Total Cost We have charged the Custom Duty, Insurance and Freight, CHS and other Import Charges to P&L already, So this all cost would be added to Inventory or not, and if yes then which cost shall be added to material Value at year end? Please advice.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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07 April 2022 Yes, add all the above costs to inventory.

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