VAT Input Credit When no Sale is their

A/c entries 592 views 1 replies

 

This is a Case of  Private Limited Company.

The Company is a construction company and has started the work on site last month. Since the Flats that shall be constructed shall be sold later, so their is no VAT liability on Output.

The company therefore shall pay Output Tax by taking 8-10 % margin over the Purchase made.

Now VAT Input a/c shall be opened in Current Assets (Duties & Taxes)


On Purchase 

Purchase Dr 
Vat input Dr
Cash/Bank/Creditor Cr

At the end of quarter Tax Payment shall be made

Transfer Input to VAT Payable

Vat Payable Dr
Vat Input Cr (with amount o/s in this a/c)

& the amount further paid being 8-9 % is also debited in Vat Payable which is also paid off

Vat Payable Dr 
Bank/Cash Cr

My Question is where we will show this VAT Payable since logically its the part of my Purchase Cost 

Replies (1)

The accounting entries 2nd and 3rd are incorrect and not necessary as well.

When you have debited VAT input in the first entry, it means that you have paid the VAT.  


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