GST ACCOUNTING

II     Accounting treatment for GST credit in case of capital goods

1. The accounting treatment recommended in the following paragraphs applies only to those capital goods which are eligible for the credit as per the relevant state laws.

2. Para 9.1 of Accounting Standard (AS) 10, Accounting for Fixed Assets, issued by the Institute of Chartered Accountants of India, inter-alia, provides as below:

“9.1 The cost of an item of fixed asset comprises its purchase price, including import duties and other nonrefundable taxes or levies and any directly attributable cost of bringing the asset to its working condition for its intended use; any trade discounts and rebates are deducted in arriving at the purchase price. …”

GST credit is considered to be of the nature of a refundable tax. Therefore, the tax paid on purchase of capital goods should not be included in the cost of such capital goods.

3. GST credit on capital goods may or may not be available immediately. To the extent GST credit is available immediately, the amount in respect thereof should be debited to an appropriate account, say, ‘GST Credit Receivable (Capital Goods) Account’ and the balance which is not available immediately, should be debited to another appropriate account, say, ‘GST Credit Deferred (Capital Goods) Account’. Subsequently, when the balance credit or a part thereof becomes available, the appropriate adjustment for the same should be made, i.e., the amount of credit becoming available should be credited to ‘GST Credit Deferred (Capital Goods) Account’ with a corresponding debit to ‘GST Credit Receivable (Capital Goods) Account’. Depreciation should be charged on the original cost of fixed asset excluding GST credit.

III   Valuation of inventories of inputs and final products

1. The inventory of inputs should be valued net of input tax. i.e. the tax on inputs will not form part of the cost of inventories. Balance in GST Credit Receivable (Inputs) Account should be shown in the Balance Sheet under the head ‘Loans and Advances’ on the ‘Assets’ side.

2. Where inputs/supplies have been obtained from small dealers or other dealers who are exempt from GST, the actual cost of purchase should be considered as a part of cost of inventory.

3. Where purchases are made from the dealers who are not eligible under the relevant State GST Laws, e.g., unregistered dealers, to pass GST credit and, therefore, cannot issue tax invoice in accordance with the applicable law, the inventories of such inputs should be valued at the actual cost inclusive of the input tax.

4. While valuing inventories of final products, the value of inputs should be net of the input tax where GST credit is available

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