Journal entry to offset tax loss in the books of service provider to issuing financial credit note.

Quick Summary
This discussion explores how a service provider should account for tax loss when issuing a financial credit note due to overcharging for subscriptions. The core issue is whether to offset the tax loss against an expense account or reverse corresponding revenue, adhering to IFRS. While initial thoughts suggest offsetting tax, the consensus leans towards adjusting against the appropriate revenue account, particularly in UK contexts where direct write-off to revenue might be necessary. It's clarified that financial credit notes differ from GST credit notes, and the tax portion requires specific handling, often not directly reversed but offset against revenue or treated as an expense if unrecoverable.

Oops sorry for being weird, it says you can offset only on the face of financial position. After a great thought, I understood those things are erp issues and if there is tax loss, you can reverse it against revenue. There is no other way. Phew! It took me a while why you had tax loss on goods returned. You can carryforward that loss as we’ll. 

To discuss further, I read your question clearly now. Since the mistake is from the distribution end, that is service not provided, Mostly it happens in UK. So we can’t create a provision for income taxes. So write off the tax loss directly to revenue. You can’t even offset. The tax aspects is not IFRS. Allowable or disallowable, im not sure. This is the end Neha. 

Now I will go back to reading options contracts. CFA has so much bond valuations when I am not even a banker. which is best mba or cfa? 

@ Prasad Nilugal how did tax loss arise? If they paid off the tax, why can’t they claim it? What is that this called tax loss marginal relief? These things must be posted in tax section

Finally, there is no tax loss here as per revenue recognition or inventory standards. People never supplied inventory. Write off loss on unsold inventory after refund. Not unless, tax had been already paid, claim it under what ever tax provisions are there. 

We can   Charge  CGST  and SGST  in Financial  Credit  Note , and  offset  by   not  uploading  on GSTN portal  . you can give  effects  in the books to offset . 

That is what I thought, it’s erp issue. 

Tax portion no need of any adjustment.... Bcz.... You have collected gst amount and paid to government and the concerned party claimed it if registered. 

Soo u have to make a journal entry only for taxable value.... 

If in case customer insist you to pay gst amount also then u have to book the same as expenses

 

Example 

Sale 100

Gst 18

Soo u have paid this 18 to government and now the time have lapsed to take back the amount... 

So u have to make journal entry for reversal only for taxable value. 

If for example that 118 is still a receivable in books than 18 rupees will be receivable after financial credit note. 

If he dint pay then claim as expenses*xpenses as baddebt. 

Correct me if I am wrong. 

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