Dear All,
A Ltd is to import goods on may 2010 for which the payment is to be made by March 2010 in euro.
full amount is paid now for the goods to be imported in the month of may
is it better to make payment now as the materialisation of transaction is in the next financial year.
whether the above transaction is to be treated as expenditure for this Fin. yr or to be taken as
advance payment .
what would be the tax implication since the payment is made this yr and the transaction materialise
in the next financial year
Regards
Malar
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advance payment on import
Replies (3)
no it cant be treated as an expense. You can only show that as an advance. you can charge an expense only when you get the bill or the goods.
Advance paid for import of goods is not an expense.It is an Asset.There is no tax-implication involved in this transaction.
Both my friends are absolutely right that the advance cant be treated as an expense in the current year
but you must also remember to make an entry to record the exchange fluctuation on such outstanding advance amount as on 31.03.2010
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