Vat

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This query is : Resolved

harshit darji (Querist)

06 July 2016 dear experts we have no vat or cst number but we have paid 42000 as vat in the year 14-15 p.y and i also know that vat is indirect expenditure for us but i forgot to placed as expense and i posted as vat refundable a/c(current assest) and we have also filed return so can i show this expenditure in the year 15-16 p.y. and if not then what will be the procedure to skip this 42000 out of current assests

harshit darji

harshit darji (Querist)

11 July 2016 give me a answer experts plz

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)

02 August 2025 In your case, you **incorrectly recorded VAT of ₹42,000** (paid during FY 2014-15) as a **VAT refundable (current asset)** instead of an **expense**, and you **don’t have a VAT registration** to claim it back. Here's how you can deal with it now in FY 2015–16:

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### ✅ Key Principles:

1. **VAT is not refundable** because you're not registered under VAT/CST.
2. Hence, it should have been **charged as an expense** in FY 2014–15.
3. Since it was wrongly recorded as a current asset and that year is now closed, **you need to correct it in FY 2015–16**.

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### 📘 Accounting Treatment in FY 2015–16:

You should **write off the balance in "VAT refundable" to P\&L** as an **indirect expense**:

#### ➤ Journal Entry:

```
Indirect Expenses A/c Dr. ₹42,000
To VAT Refundable A/c ₹42,000
(Being VAT wrongly shown as asset in earlier year, now written off)
```

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### ⚠️ Important Notes:

* **Don't show it as an expense in FY 2014–15 now**, since the books are closed.
* Showing it in FY 2015–16 is **acceptable as a prior period adjustment**, as long as it's **disclosed properly** in your notes to accounts or audit report if applicable.
* This will reduce your profit for FY 2015–16.

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### 📝 Optional Disclosure in Notes (if audited):

> “During the year, VAT of ₹42,000 pertaining to FY 2014–15, incorrectly carried forward as an asset, was written off to the profit and loss account.”

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Let me know if you need a revised trial balance or tax treatment details.

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