Closing Stock Valuation

Closing Stock should be valued  inclusive of all taxes.

regards,

ratan

If u have credit taken VAT paid then exclude taxes for valuation of Goods.

but If Credit not taken then all taxes are part of cost of good so include it.

Sanjay sir is right

i.e If you are following exclusive method for accounting VAT.(as guidance note issued by ICAI)

Closing stock should be valued exclusive of vat

Originally posted by : CA Sanjay
	If u have credit taken VAT paid then exclude taxes for valuation of Goods. but If Credit not taken then all taxes are part of cost of good so include it.

 Dear Sir,

If we have taken the credit and excluded VAT from closing stock valuation then provisions of 145A will still be violated because section does not state that there is no need to include a tax if its creit is taken.

Is my doubt correct ?

Somtimes all these thing are not written in section.

that time apply AS 2, it clears that if credit taken of taxes then taxes are not form part of cost of goods.

Secondaly u have to not taken double benifited because it directly violationof law.

If u have taken credit then how can u have to add valuation of goods.

I have no doubt about it.

So be Happy

Hello, Agreee with sanjay sir regarding the valuation inclusive if not taken vat credit.

145A is very clear about the inclusive and exclusive methods of accounting. There is no violation. You just have to make a inventory sheet showing price and vat for the sake of TAX audit...

agree with CA Shivang

But Section 145A states as under:

Hello Aditya,

It is normally meant that all the tax and exp which are expense out are to be included.( notwithstanding any right arising as a consequence to such payment). Here for the VAT the asseessee has a right to take credit..

So normally its inclusive of other exp excluding the TAxes for which the credit is taken or will be taken.

Then why does the explanation say any tax, duty, cess or fee (by whatever name called) under any law for the time being in force, shall include all such payment notwithstanding any right arising as a consequence to such payment which seems to be referring to the right to take credit on the purchase of goods.

AS 2 issued by ICAI requires cost of inventory to include cost of materials, cost of conversion and any cost incurred for bringing the inventory to its present location and condition. Further cost of materials shall include cost of purchase, freight and taxes which are not refundable. Hence for presenting financial statements under Indian GAAP inventory shall not include VAT paid thereon if it can be taken as Input Credit  for subsequent utilization towards payment of VAT charged on sales. This is known as exclusive method.

However  under Section 145A of Income Tax Act,  the statute has asked to follow inclusive method while computing the value  of inventory, purchases & sales. In other words, purchases, sales and inventory shall include all taxes paid there on.

But in both the cases the effect on net profit or loss in the Profit & Loss Account shall be same since under inclusive method, both  closing inventory (a Cr Side Item)   and  purchases (a Dr Side item) shall  include VAT paid there upon thereby nullying the effect of VAT in closing inventory. 

simply add VAT only if u have not taken its set off yet ...

Originally posted by : Dibyendu Nandi
	AS 2 issued by ICAI requires cost of inventory to include cost of materials, cost of conversion and any cost incurred for bringing the inventory to its present location and condition. Further cost of materials shall include cost of purchase, freight and taxes which are not refundable. Hence for presenting financial statements under Indian GAAP inventory shall not include VAT paid thereon if it can be taken as Input Credit  for subsequent utilization towards payment of VAT charged on sales. This is known as exclusive method. However  under Section 145A of Income Tax Act,  the statute has asked to follow inclusive method while computing the value  of inventory, purchases & sales. In other words, purchases, sales and inventory shall include all taxes paid there on. But in both the cases the effect on net profit or loss in the Profit & Loss Account shall be same since under inclusive method, both  closing inventory (a Cr Side Item)   and  purchases (a Dr Side item) shall  include VAT paid there upon thereby nullying the effect of VAT in closing inventory.

 thanks for explanation in detail to have our doubts clarified