I suggest to include the same, however it should be in line with your accounting practice.
In the “Guidance Note on Terms used in Financial Statements” published by ICAI, “the expression “Sales Turnover” has been defined as: “The aggregate amount for which sales are effected or services rendered by an enterprises.
An extract of section 145A is as follows: 145A. Notwithstanding anything to the contrary contained in section 145, (a) the valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under the head Profits and gains of business or profession shall be (i) in accordance with the method of accounting regularly employed by the assessee; and (ii) further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation. Explanation.For the purposes of this section, any tax, duty, cess or fee (by whatever name called) under any law for the time being in force, shall include all such payment notwithstanding any right arising as a consequence to such payment.
Therefore , in my opinion , maintaining accounts of excise duty VAT separately is not correct in terms of section 145A of the I T Act. In that sense , for determining the meaning of the word “sales turnover” VAT or excise duty should also be considered for purpose determining the criteria for getting accounts audited u/s 44AB of the I T Act.
Thanks//Vaibhav Revert for more clarity. Use thank button to convey your appreciation.
06 December 2012
It depends on method of accounting following by you. I.e in case you separately not accounting for VAT i.e debiting to P&L account at the time of payment of VAT to the department then it is inclusive of VAT.
However as per AS-2 requires valuation of stock should be excluding of all taxes,duties etc.... which will be refundable or creditable or adjustable. So treating of purchases and sales and valuation of stock is deffer. So if you accounting including of VAT then give statements including VAT.
06 December 2012
Thanks for your reply Vaibhav and Tirumala.
Vaibhav, I am not really sure if you are talking in the same context. We are not relating to the IT act anywhere here. My question is whether VAT should be included in sales while we are submitting stock statements to the bank. And we are not getting books audited under the section mentioned by you.Plus why would VAT be taxed as it is not a part of Income.. we claim credit and pay the rest to the Govt. You are right about the section and its interpretation but i am afraid to use it since lack of relevance. Thanks for you effort and time though. Much appreciated.
Tirumala, we are maintaining separate account for VAT credit and Vat payable. So i guess it should be exclusive.
I have found a relevant answer from another expert as a PM. would like to quote here since i found it very usable in this case. "If the company is availing VAT input credit, then sales and purchases should be exclusive of VAT while submitting stock statements to Bank. The reason for excluding VAT is that there should not be excess drawing power on Cash credit or Overdraft limit of the company if you include VAT on Sales. Banker will not finance on VAT component if the company is availing VAT input credit which is not allowable under banking norms. "
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