Duty credit script accounting under fps

Accounting Entries 17663 views 5 replies

Shwethask

Accounts Manager

38 Points Posted on 05 April 2013

Dear All,

We are operating under Garment Industry and are eligible for claiming duty credit scriptt license utilization.

We have been accounting this on accrual basis upto FY 2010-11. that is entire license value applied for is accounted and whatever certificate we received for the same has been recognized as per following sceme of entries:

1. Dr. Duty Credit Script Receivable

Cr. Duty Credit Script

(For recognizing the income)

2. Dr. Duty Credit Script certificate on hand

Cr. Duty Credit Script receivable.

(For receipt of certificate)

3. Dr. Import duty paid on Accessories (Exp)

Cr. Duty Credit Script Certificate on Hand.

(For recognizing utilization of duty credit scrip certificate for paying duty)

Now I would like to know how I have to account for balance license value applied for but not certified. Should I have to write that off as expense and if so where I will have to expense it off. Kindly provide the same.

Replies (5)

CMA Shilpa Shinde

COST ACCOUNTANT

217 Points Posted on 05 April 2013

Dear Shwethask,

Ur all entries are correct.

Balance in FPS REceivable Account - which is shown broadly as Current Asset in Balance Sheet till the time same is received in form of License.

So, for example applied FPS amounts to Rs.100/-, against which Rs.90/- actually received, short by Rs.10/- and further If this amount (Rs.90/-) is full and final against applied, so balance Rs.10/- should be written off to P & L, you may show such write off separately under suitable account head.

Narendra Parmar

Manager

27 Points Posted on 20 February 2014

Dear Shwethask and Shilpa,

Based on which accounting standard, revenue has been recognised at the time of application for such duty credut scrip?

Will it be appropriate to recognise the same at the time point of application or it should be recognised based on utilisation of the scriptt at the time of import against the such scrip.

Please clarify the matter.

CMA Shilpa Shinde

COST ACCOUNTANT

217 Points Posted on 21 February 2014

AT the time of making application.

Shwethask

Accounts Manager

38 Points Posted on 24 February 2014

Hi Narendra, There is no specific accounting standard for treatment of duty scrip. however, we have a expert advisory committee opinion from ICAI applicable to DEPB scheme which makes very much clear on accounting and treatment in the books.

try finding the opinion @ below link

https://www.knowledgebible.com/forum/showthread.php/5184-Accounting-and-auditing-practices-Volume-20-Query-No-28-Accounting-treatment-of-export-incentives-under-the-Duty-Entitlement-Pass-Book-DEPB

Partho Protime Bose

Senior Manager Accounts

22 Points Posted on 15 May 2017

In a case where one have applied duty scrip in Mid/end of March & got the license in April, they will unnecessarily have to pay tax in previous year & in case the license is not issued on time/partly issued against what was applied it will be an added disadvantage. It will also create additional disadvantage going by this practice on the enormous hit that cash flow will get.

In my opinion, income should be recongnised upon receipt of license from DGFT/(&Customs) ....sanctioned date/license issue date(whichever is earlier) when we have the proper denomination of scrips with serial nos etc.