Vat refund disallowed

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

04 September 2014 Dear all,
Our Refund of F Y 2010-11 is Rs.241985/- but after assessement with sales tax officer it comes payable Rs.52854+interest Rs.25766 as STO disallowed some purchases. so, what should i pass entry for this liability booking and disallowance of refund?

Querist : Anonymous

Querist : Anonymous (Querist)

04 September 2014 Please help me on my above Question

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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03 August 2025 To record the **liability arising from the disallowed VAT refund and interest**, you can pass the following accounting entries:

---

### 1. **When the VAT refund is disallowed, and you now owe tax + interest:**

* **Tax Liability (Payable) Entry:**

```
VAT Refund Disallowed (Expense) A/c Dr. 2,41,985
To VAT Payable A/c 52,854
To Interest Payable A/c 25,766
To VAT Refund Receivable A/c 1,63,365
```

*(This entry reverses the refund previously claimed and recognizes the new liability)*

---

### 2. **Alternatively, more practical way:**

* Reverse the VAT refund amount already recorded as receivable:

```
VAT Refund Receivable A/c Dr. 2,41,985
To VAT Liability A/c (Tax Payable) 52,854
To Interest Payable A/c 25,766
To Profit & Loss (Expense) A/c 1,63,365
```

* This reflects that out of the refund amount, some part is payable (tax + interest), and the balance is now disallowed and treated as an expense.

---

### 3. **When you pay the amount later:**

```
VAT Liability A/c Dr. 52,854
Interest Payable A/c Dr. 25,766
To Bank / Cash A/c 78,620
```

---

### Summary:

* **Disallowed refund portion** → Expense
* **Tax + Interest payable** → Liability
* **Refund receivable balance reversed**

---

If you want, I can help you draft the journal entries in your accounting software format or prepare a simple Excel template for VAT refund adjustment. Would you like that?

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