Doubt regarding excise duty in relation to costing

as per AS -2 valuation of inventories if u claim cenvat credit of your taxes paid on input than that will ot form part of your cost as your output tax liability will be set off with input.

however if u are not able to claim your taxes paid than that will be added to your cost of productionand your stock will be valued inclusive of taxes in that case.

regards.

Dear Mr. Jain,

Thank you for your reply. Honestly I did not understand your reply. I have a  limited accounting background.  If you could break it down for me  in simple words I would be thankful. 

Regards,

suppose your tax amount paid is 12.36 on rs 100.

that means your input tax paid is 12.36.

now output tax payable on value of say rs 500 @ 12.36% i.e. 61.80

that means your output tax liability is rs 61.80.

case 1 :you can take credit of your duty paid :

in case if you can take credit of your input tax paid with your output tax liability i.e. (61.80-12.36)=49.44.

stock to be valued at cost exclusive of duty paid since dredit is taken : 100.

case 2 :you cannot take credit of input tax paid on raw material

since you cannot take the credit stcok will be valued at caost and taxes paid i.e. 100+12.36 = 112.36.

this valuation is as per as-2.

hope this will make you clear.

in case you dont., please revert back.

regards.,

Dear Mr. Jain,

Please tell me if this is what you have tried to explain to me.

Scenario : Raw material at Rs. 100 and input tax at 12.36

1. I buy raw material paying input tax and sell it as a finished product with output tax. I should consider my raw material at 100?

2. If I buy raw material paying input tax and it is part of my stock, my stock will be valued at 112.36? 

Thanks!

if you are paying tax on raw material in cash than your stock will be valued at 112.36.

if you are availing credit of tax paid on raw material than stock will be valued at rs 100.

With regard to reporting under section 227(2) of the Companies Act, 1956, the Committee is of the view that the amount of excise duty not included in the opening inventories is not required to be taken into account in this case since non-inclusion of excise duty in the valuation of inventories was permissible at that time. However, the auditors should consider the amount of excise duty not included in the value of closing inventories. The Committee, however, notes that non-inclusion of excise duty in the value of closing inventories will not have any impact on the profit/loss for the year, but will have impact on the ‘current assets’ and ‘current liabilities and provisions’ in the balance sheet as these will be understated by the amount of the excise duty not provided for. The auditors should, accordingly, qualify their report in the manner required in the ‘Statement on Qualifications in Auditor’s Report’, issued by the Institute of Chartered Accountants of India.