There is a government (client) bill on which GST amount is not paid to contractors,then after adjusting the ITC,balance GSTpayable on sales is paid by the contractor.Now Debtors dr balance is raised due to GST liability is now Closed With an expense account,is accounting acceptable?
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GST as expense or income
Replies (5)
You mean GST paid by the Receiver...
Right?
Right?
GST is paid by contractor for service provided to client( govt) and amount is not received from government,so the debtors balance(govt account)is having gst liability dr.balance and it is transferred to expense account to close the account.Contractor claimed ITC on that GST liability.is this accounting treatment correct?because next year if government releases the same GST amount it is treated as income.
Generally you hv to claim thru input tax credit.
You have to keep the Debit balance as receivable, not to transfer any where. As and when received from Government the said account shall be nullified.
| Originally posted by : see lee | ||
 |
GST is paid by contractor for service provided to client( govt) and amount is not received from government,so the debtors balance(govt account)is having gst liability dr.balance and it is transferred to expense account to close the account.Contractor claimed ITC on that GST liability.is this accounting treatment correct?because next year if government releases the same GST amount it is treated as income. |  |
No...
Keep the balance and it will be close after receiving the amount from Client.
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