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Treatment of excise duty in value added statement

28 April 2012

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 ?

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4 Replies

DIBYENDU (SERVICE) (266 Points)
Replied 28 April 2012

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.

1 Like

CA Riswa Parekh (Practicing) (1591 Points)
Replied 30 April 2012

Treat it as expense.

CA D. Singhal (CA ) (490 Points)
Replied 30 April 2012

@ 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 ?

Maarisha (Student CA Final ) (21 Points)
Replied 05 March 2016

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