Hi,
I am into a business where i am intermediate and provide service to my tenants. i buy goods/services and charge back to tenants with no profit or commission.
my understanding, let’s say we have an net invoice of Rs. 1000 with ST of Rs. 140 and SBC of Rs. 5.0 = Gross value of invoice is 1145.00
My cost in books is Rs. 1005.00
If this is TRE expenses, let’s say we have two scenario:
Scenario 1 = we will charge Rs. 1000 to tenant and collect Rs. 140 ST (14% - ARE collects and pay to Government) and 5.00 as SBC (5% - ARE collects and pay to Government) – that means my recovery is only 1000 out of my cost of 1005.00
Scenario 2 = we will charge Rs. 1005.00 to tenant and collect Rs. 140.7 ST (14% ARE collects and pay to Government) and 5.025 as SBC (5% ARE collects and pay to Government) – that means my recovery is only 1005.00 out of my cost of 1005.0
Am thinking that scenario 2 is correct.
Kindly suggest which is correct as per accounting standards.
Thank you,
Muralidhar.
CAclubindia
