VAT

Pvt. Co.- Pls suggest me whether  'net VAT' (input credit-output liability) is a business expenditure and has to be debited to p&l or not? or is adujusted in any thing else. Some say that net VAT is the customer paid amount, that we collect on behalf of customer and no way a business expense that can be claimable in the p&l account. pls suggest me. thanks for all the members

Replies (4)

IT IS DEBITED TO THE PROFIT AND LOSS A/C.

It cant be debited to p&l A/c as you are not incurring any expense. You are just collecting from the customers and paying the same to government.

Originally posted by : ravi

Pvt. Co.- Pls suggest me whether  'net VAT' (input credit-output liability) is a business expenditure and has to be debited to p&l or not? or is adujusted in any thing else. Some say that net VAT is the customer paid amount, that we collect on behalf of customer and no way a business expense that can be claimable in the p&l account. pls suggest me. thanks for all the members

 It should not  be debited to P&L Account as it is not your money.

To add further evidence, see the following ICAI link:

https://www.bcasonline.org/knowledge/Referencer/may.pdf

See the bottom of the 6th page,you will understand.

Hope you understand

Thanks & Regards

Originally posted by : ravi

Pvt. Co.- Pls suggest me whether  'net VAT' (input credit-output liability) is a business expenditure and has to be debited to p&l or not? or is adujusted in any thing else. Some say that net VAT is the customer paid amount, that we collect on behalf of customer and no way a business expense that can be claimable in the p&l account. pls suggest me. thanks for all the members

if your sales are booked inclusive of VAT, then its expenditure ( indirect) in P/L account, 

usually VAT is current asset account which get credited with purchase and cash deposit, and debited with sales.

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