Write off import dues on account of disputes

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This query is : Resolved

Rahul Bothra (Querist)

10 January 2013 There was a dispute over quality matter with a Supplier. The Payment is on hold from last 2 years. We have come on a conclusion that we are not paying the import dues. For settling the same the supplier has given us a confirmation on mail, to write off the dues.
Please advice what is the procedure for writing off the import dues?

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)

03 August 2025 When you decide to write off import dues due to disputes (like quality issues) and have supplier’s confirmation, here’s the usual procedure you should follow to ensure proper accounting, compliance, and legal safety:
Procedure to Write Off Import Dues on Account of Disputes
Document Supplier’s Confirmation
Keep the written confirmation/email from the supplier clearly stating the acceptance of write-off or waiver of dues.
This will serve as evidence in case of future scrutiny.
Internal Approval
Obtain necessary approvals from your company’s management or board of directors for the write-off.
Follow your company’s internal policy for write-offs (e.g., approval limits, documentation).
Accounting Treatment
Pass a journal entry to write off the outstanding payable amount.
Example entry:
Debit: Import dues payable account
Credit: Write-off/Bad debt account or other relevant expense account
Disclose this write-off properly in your financial statements as per accounting standards.
Impact on Customs/Duties (If Applicable)
Ensure that customs or import duty liabilities are not outstanding or separately settled.
Confirm that the write-off does not affect any duty liability with customs authorities.
Tax Implications
Consult tax advisors on any tax impact (e.g., deduction of bad debts).
Maintain all documents for tax audit purposes.
Legal Closure
Prepare a formal Write-off Agreement or settlement letter signed by both parties if possible.
Retain all communications related to the dispute and settlement.
Notify Banks/Finance Department
Inform banks or finance providers if the dues were financed or under Letter of Credit (LC).
Close any related finance facilities if applicable.

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