Vat penalty against c form

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Querist : Anonymous

Querist : Anonymous (Querist)

24 October 2015 Hi All,

I have doubt about Head in P & L A/c in which Penalty of Vat against C Form shown

CA AnKiT BoHrA (AB)

CA AnKiT BoHrA (AB) (Expert)
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26 October 2015 what sort of penalty is that buddy

Querist : Anonymous

Querist : Anonymous (Querist)

26 October 2015 Sir we sale against C Form but at the time assessment some party refuse to giving c form. in this ways sales tax raised penalty of difference vat amount with interest

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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02 August 2025 Got it! Here's how to treat **VAT penalty related to C Form non-receipt** in your accounts:

### Situation:

* You made sales **against C Form** (which allows you to sell goods interstate at a concessional CST rate, typically 2% or 0%).
* But the buyer failed to provide the C Form.
* As a result, the tax authorities reassessed and demanded **difference VAT/CST** plus **penalty and interest** because without C Form, concessional rate is not allowed.

### Accounting treatment:

* **Penalty and interest paid on account of non-receipt of C Form** is a **business expense**.
* You should **show the penalty under an expense head in the Profit & Loss Account**.
* Common heads used:

* "VAT Penalty"
* "Sales Tax Penalty"
* "Penalty and Interest on VAT/CST"

### Disclosure in financial statements:

* The amount paid as penalty reduces your net profit.
* It is not adjusted against sales or VAT output tax accounts but shown as a separate expense.

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If you want, I can help draft the journal entries for this?

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