licence regarding

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

13 June 2011 The company X got licence under Krishi Vishesh Upaj Yojna.We advice on financial enteries to be passed in the following cases:-

1. At the time of getting licence.
2. At the time of duty free import
3. At the time of duty free export
4. If licence is sold at profit or loss

If Company Y purchases the license from X then what entry will be passsed in the books of Y.

Please help

RAMESH KUMAR VERMA

RAMESH KUMAR VERMA (Expert)
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13 June 2011 LINK IS :-

https://www.caclubindia.com/share_files/export-import-accounting-entries-37679.asp

Querist : Anonymous

Querist : Anonymous (Querist)

15 June 2011 not satisfied

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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02 August 2024 The Krishi Vishesh Upaj Yojna (KVUY) is a scheme provided by the Government of India to promote agricultural exports by providing various incentives, including duty-free import benefits. Here’s how to handle the financial entries for the license under KVUY for both the issuing and purchasing company:

### **1. At the Time of Getting the License**

**For Company X:**

- **Receiving the License**: There is generally no direct financial entry for just receiving the license unless there is a fee or other costs associated with obtaining the license.

**Example Entry**:
If there’s a registration fee:
```
Dr. License Fee Expense (P&L) XXX
Cr. Bank/Cash XXX
```

The license itself is not typically booked as an asset but as a right to avail of benefits.

### **2. At the Time of Duty-Free Import**

**For Company X:**

- **Import with Duty-Free Benefits**: The entry for importing goods under the duty-free license would not have a direct impact on the financial statements related to the license but rather on the inventory and import-related entries.

**Example Entry:**
```
Dr. Inventory/Raw Material (at cost) XXX
Cr. Accounts Payable/Bank XXX
```
The import duty is zero, so no additional duty entries are needed.

### **3. At the Time of Duty-Free Export**

**For Company X:**

- **Export Under Duty-Free Benefits**: Similarly, the financial impact would relate more to revenue and related costs, not directly to the license.

**Example Entry:**
```
Dr. Accounts Receivable/Bank XXX
Cr. Sales Revenue XXX
```

### **4. If License is Sold at Profit or Loss**

**For Company X:**

- **Sale of License**: When the license is sold, it’s considered a transfer of an intangible right. Any gain or loss from this transaction should be recognized.

**Example Entry:**
- **If Sold at Profit**:
```
Dr. Bank/Cash XXX
Cr. License Sale Income/Other Income XXX (Profit)
```
- **If Sold at Loss**:
```
Dr. Bank/Cash XXX
Dr. Loss on Sale of License XXX
Cr. License Sale Income XXX
```

### **For Company Y (Purchasing the License)**

**When Company Y purchases the license from Company X:**

- **Recording the Purchase of License**: Company Y will record the purchase of the license as an intangible asset.

**Example Entry:**
```
Dr. Intangible Assets (License) XXX
Cr. Bank/Cash XXX
```

If Company Y’s purchase includes a license fee:
```
Dr. Intangible Assets (License) XXX
Cr. Bank/Cash XXX
```

### **Summary of Entries:**

1. **Receiving License**: Typically, no entry for the license itself. Record any associated fees.
2. **Duty-Free Import**: Record inventory or raw material and related costs.
3. **Duty-Free Export**: Record sales and related revenue.
4. **Sale of License**: Record the sale and recognize any gain or loss.
5. **Purchase of License**: Record the license as an intangible asset in the books of the purchasing company.

For more precise entries, especially considering the specific provisions of KVUY and any applicable tax regulations, consulting with a professional accountant or financial advisor is advisable.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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