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Tax effect on p & l

Sachin Rajput (account exe) (593 Points)

24 September 2011

Dear all,

Please let me know service tax , sales tax or vat effect to p& L.

if we paid service tax or vat ,it debit in p& l or not?

Thanks in advi

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6 Replies

C.A. Sandeep Wawhal (Chartered Accountant PGDFM BCom.) (1823 Points)
Replied 24 September 2011

These taxes are indirect taxes, hence if tax paid on purchase or expense you will get credit of it if allowable as well as taxes collected on sales must be payable to concern tax authority hence tax on purchase/ expenses will Dr to receivable a/c under duties and taxes and tax on sales will Cr to payable a/c under duties & taxes. If balance of duties and taxes is Cr. then you have to paid tax as per Cr. amount if balance is Dr. then this amount will transfer to receivable account under Loan & Advances.

My explanation tells that there is no effect in P&L account

In the case of disallowances for set off then such disallowed amount should be transfer to P & L account.

Prakash (Chartered Accountant) (560 Points)
Replied 24 September 2011

If you are not claiming any Input Credit in respect of above (CENVAT), you can show them as expenses and debit the same in P&L A/c

IF claiming Input Credit, nothing shown in P& L A/c , Accounting should be done as Balance sheet Item

How to present as per Income Tax act refer here

/forum/section-145a-of-it-act-for-tax-audit-167874.asp

Shaji Balan (Accounts in Charge) (25 Points)
Replied 24 September 2011

Statutory payments are not business expenses, so u can't show it in P & L Account. Create Payable A/c. and when u pay the Tax Debit Payable A/c. and so on.

Prakash (Chartered Accountant) (560 Points)
Replied 24 September 2011

Small Clarification in Shaji Balan Post

Its the statutory payments collected from Customers or clients, Output taxes we can say, not all statutory payments

Sachin Rajput (account exe) (593 Points)
Replied 24 September 2011

But as per P& L Provide by income tax site,tax debit to P&L.

See attached file.....

Attached File : 622297 837053 p l.xlsx downloaded: 123 times

C.A. Sandeep Wawhal (Chartered Accountant PGDFM BCom.) (1823 Points)
Replied 24 September 2011

As per excel file attached by you.

1) Taxes on Sales should come should come in column no. 2

2.) Taxes on Purchase should come in column no. 8 ( If Taxes on purchase excess than taxes on sale the balance should be deduct from taxes on purchase)

3.) if Taxes on Sales excess than taxes on purchase, balance amount payable should come in column no. 34.