In the case of a trading concern VAT input tax paid on purchase separately get captured. (Vat input A/c). Therefore the closing stock value automatically do not include the VAT element.
My question is whether we should include VAT in the value of closing stock.
Practically nobody seems to do this
if input credit not available, then no other option but to add to cost of purchase and value as inventory. AS 2 allows this
Dear Sunny
My question is with reference to Section 145A. Even if input tax is available I think we need to separately compute the value of closing stock (to include the VAT element).
Vat is excluded at the time of entry and vat input account is generated ,
now vat inpuit credit account is also part of balance sheet asset, in duties and taxes.
so any balance of vat credit is now available in valuation alongwith stock in trade.
w.r.t section 145A, it seems we have consider tax for valuation purposes, even if the cenvat credit is available. But, AS 2 mentions specifially that we have to exclude it. When we have to take credit of the input tax paid, there is no question of debiting the tax so paid, therefore considering the same for valuation of closing stock seems illogical.
as per AS 2, duties and taxes forms part of closing stock. but duties an taxes which are reimbursed subsequently are not to be included. as input VAT paid on purchases is eligible for set off with output VAT liability, input VAT is not to be included in valuation of inventory as per AS 2.
CAclubindia
