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Purchase from unbranded/unregistered sellers

Maha (owner) (62 Points)

28 March 2014

We used to purchase wooden furnitures from small unbranded/unregistered sellers using cash or cheque. In that case how it can be brought in to the inventory and tax. In short how to handle the unbilled purchase and tax.

Regards

Maha

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9 Replies

Manoj Mehta (Head Of Department (Accounts & Finance)) (1479 Points)
Replied 28 March 2014

Dear sir just make it as second hand purchases from customers in your WIP inventory. In that case no need to take biils. (for cash purchase) but not in cheque. Put normal local purchase entries in your books. I hope answer is clear. Regards

1 Like

CA Saroj Kumar (Keen to learn something new every moments) (2588 Points)
Replied 28 March 2014

Dear MAHA

If u could able to do this as like this it may help u better

First make a management letter about the purchasing of material and content in letter should be specifiying the terms that due to non availablity of material and urget requirement the company store official are advised to get material in cash or petty cash, This procedue u will not reuired any bill, in fact at the time of audit u can easly explain it. The letter should be signed by the head or higher authorised person.

After purchaisng make entry as usual.

1 Like

Maha (owner) (62 Points)
Replied 28 March 2014

1 ) Thanks for you reply. But in case of unbilled purchase of unbranded items as mentioned above do i need to pay tax for that purchase also ( as that user will not pay tax as he is not registered ) OR can i just treat this as normal purchase ( like branded with bill ) and add it to inventory and while selling alone just pay 14.5 VAT for the total sale amount of this unbilled purchase item.

2 ) Also someone say that as that seller dont have letterpad/bill he have to sign the voucher of us and then get the cash and also he have to sign a note called Bought note. I don't have idea of it. can you help.

Thanks

CA Saroj Kumar (Keen to learn something new every moments) (2588 Points)
Replied 28 March 2014

yes both practices are rapidly followed in business so..dont hve to wory ...do as per ur convenient....

Maha (owner) (62 Points)
Replied 29 March 2014

This part of question is not answered

"But in case of unbilled purchase of unbranded items as mentioned above do i need to pay tax for that purchase also ( as that user will not pay tax as he is not registered ) OR can i just treat this as normal purchase ( like branded with bill ) and add it to inventory and while selling alone just pay 14.5 VAT for the total sale amount of this unbilled purchase item."

Also process on bought note is also not answered.

Regards

Maha

CA Saroj Kumar (Keen to learn something new every moments) (2588 Points)
Replied 29 March 2014

maha ....for first ques. if u purchased unbiled for unbrand item then u no ned to pay tax bcs if u will pay tax u need proof of tax pay for claiming the same even under vat audit u hve to show it. but there is a prob. arise that if assessing officer have any doubt that u are purchased unbilled item just to aviod tax then.u may penalied for that. second thing if u will treat it normal purchase then how could u prove that the cost of purchase in inclusive of purchase even u do not have bill. so better is to obtain unbilled without paymenr of tax. however fake bill are easly availble inmarket with original details like vst reg no. date, invoice no..etc..

Maha (owner) (62 Points)
Replied 29 March 2014

Thanks for the quick response. So in short do you mean just purchase the unbilled item using cash just by getting signature in our voucher with out tax and while selling pay the tax of 14.5% of the sold value. So in this case the only proof of purchase is the sign by the unbranded seller/person in our voucher.

The other option is purchase using some dummy bill available in the market which will have tax part mentioned also and then while selling pay the 14.5 just for the difference in amount.

Is both of my understanding right ?

Regards

Maha