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Treatment of excise duty in value added statement

CA Final 2747 views 4 replies

Logically, what should be the treatment of Excise Duty; whether it should be considered as an expense or application of value added?
What is the basis for deciding its treatment ?

Replies (4)

If you are a dealer, who are entitled to enjoy CENVAT Credit then it will be adjusted from your Service Tax liability,  show it  under head duties & taxes, and adjust from your Service Tax payble amount .and if no CENVAT Credit is available then treat this an expenses ,  include total cost of respective material purchase.

Treat it as expense.

@ Riswa : Yes, I am actually considering it as an expense on the assumption that it is recovered at a later stage and the amount of sales includes the excise duty, but; after going through the institute material i have come to know that there goes a parallel assumption to treat it as an application(obviously considering it as irrecoverable); so my query is centered around two points basically - 1. What would be the most logical assumption? 2. How is it dealt in practical world ?

Excise duty can be treated in either of the ways as VA statements are non standardised. It is clearly stated in study material of financial reporting for ca- final provided by ICAI " Another contemporary criticism of VA statement is that such statements are non- standardised... Excise duty has been shown as part of bought-in cost and deducted while calculating value added. Some academics argued that such excise duty should be shown as an application of VA. However this practice of non- standardisation can be effectively eliminated by bringing out an accounting standard on value added. Therefore the criticism is a temporary phenomenon." 

So, whichever method you will opt, it will be correct.

for your reference-  https://resource.cdn.icai.org/19335sm_fr_finalnew_cp10.pdf    > page 10.7 para 1.6


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