In export WITH PAYMENT OF IGST and refund IGST

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Dear sir 

In export with payment of tax IGST paid through ITC and then after IGST refund by the government at that time IGST REFUND can be liable to income tax or not 

 

 And how to entry show in Books of account 

Replies (2)
  • As clarified by tax tribunals and experts, the IGST refund is not treated as income; it is effectively a neutral transaction for income tax purposes, since the original outflow (payment of IGST) did not reduce taxable profits.
  • The IGST refund received after export is not taxable under the Income Tax Act, as it simply restores the tax-neutral position of the exporter.

  • The exporter is not required to offer the IGST refund as income since the payment was originally offset against ITC and not claimed as an expense in the Profit & Loss account.

The standard journal entries for IGST paid through ITC and the subsequent refund are as follows:

  • At the time of export (when IGST is paid through ITC):

Output IGST A/c        Dr
    To Input IGST A/c

The standard journal entries for IGST paid through ITC and the subsequent refund are as follows:

  • At the time of export (when IGST is paid through ITC):

Bank A/c               Dr
    To IGST Receivable/Refund A/c

 

Alternatively, some accountants directly credit the Input IGST A/c if a separate refund receivable account is not used.

No income is booked at the time of the refund, as this is not revenue but rather a return of a tax credit asset.


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