Treatment of vat paid on purchase of any asset

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Harminder Singh (Querist)
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31 December 2009 Sir i want to know the accounting treatment of vat paid on purchase of an asset, shall it be bifurcated like we does in case of general purchase of goods or shall it be treated in any other way?

CA.SHAHZAD SAYYED

CA.SHAHZAD SAYYED (Expert)
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31 December 2009 Dear Singh
There are two ways
1) if you take credit of Vat paid on Capital Asset then you have to open separate account with the name of "Vat paid on Capital Asset" Note: Vat on Capital assets is not fully allowed but there are Reduction.
2)If you are not taking credit of Vat paid on Capital Asset then Capitalised the whole vat amount with Cost of Asset

Heera Nahariya

Heera Nahariya (Expert)
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31 December 2009 if your concern is a manufacturing concern then you can avail input credit of such vat (in installment - statewise differ. Use of such asset is crucial cirteria. In other case it is to be added to the cost of the asset and depreciation is to be claimed on the same.

eg. your concern is a manufacturing concern then VAT input is to be taken.

if your concern is a service providing concern like beauty parlour then services provided are not subjected to VAT hence the equipments purchased for such concern is not eligible for input vat credit.

Harminder Singh

Harminder Singh (Querist)
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02 January 2010 Thank u Sirs for ur guidance

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