RESPECTED SIR/MADAM,
I HAVE BEEN IN THE GOLD JEWELLERY INDUSTRY FOR LAST 7 YEARS AND MY BIGGEST PROBLEM IS THIS. ASSUME I OPEN A NEW SHOP WITH ONLY 1 GRAM GOLD AS STOCK. I HAVE PURCHSED THIS AT 1000 RUPEES. TOMORROW WHEN THE MARKET OPENS WITH GOLD RATE 4000. I SELL MY 1gram WITH 5% MARGIN i.e., 4200. NOW I HAV TO RESTOCK MY 1 GRAM WHICH WILL BE AT 4000(market price). SO ESSENTIALLY MY PROFIT IS ONLY 200 AND IM LIABLE TO PAY 30% ON 200. WHY DOES MY ACCOUNTANT SAY I HAVE TO COMPUTE TAX THE FOLLWOING WAY ((1000(opening stock) + 4000 (purchase value)-4200(sales vaule) ). = 800. MY NET PROFIT HAS JUST QUADRUPLED AND IM PAYING TAX FOR WHAT I HAVE NOT PROFITED/EARNED.
CAclubindia
