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Question ID : 34812


As per ICDS –II the Inventory value should include taxes. There is a purchase of Rs.1,18,000/- which includes GST of Rs.18000/- which is accounted in Input GST account and carried to Balance Sheet if not utilised on the date of Balance sheet. In the above situation purchases debit will be only Rs.100000/. But closing stock valuation will be.1,18,000/- including taxes. As per ICDS the party’s income is artificially booked at Rs.18000/- for purpose of income tax levy. Is my understanding corect. If.Yes, how to address this problems

Posted by Ethirajan on Sep 19, 2018


Answer ID : 73962

ICAI has issued guidance note on treatment of CENVAT which states that an entity should follow either inclusive method or exclusive method of accounting for treatment of Cenvat. That means either both sales and purchases should be reported including cenvat or excluding cenvat. This treatment as narrated by appears to be inconsistent.

Posted by Deepak Gupta on Sep 22, 2018