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Accounting Solution of VAT Problem of Plastic Bottle Manufacturing Co.

Problem

Presently I am working in plastic bottle manufacturing co. as a post of production & account supervisor. During this so many problem arises one of which that when we purchase machinery parts for repairing machinery in this situation can we take the credit of input vat! or not, how can we pass this entry.


Solution

Yes, you can take credit of Input VAT only if you get the price of sold machinery parts. But your situation is quite different. You are final consumer of machinery parts and you are not selling, you can not get credit of Input VAT. Credit of Input VAT means , you can cover your input VAT which you have to pay to your supplier from the total Output VAT which you have obtained from your customer after selling same product .

Actually, after 1 April 2005, VAT is applied in India and its simple meaning of value added tax. If sell any product you have to only deposit VAT in Govt. which is excess of output VAT over Input VAT . Suppose, you have sell your plastic bottles, then on these sold bottles, you can get credit of your input VAT.

You have also the journal entry of passing it. This is below :-


For purchasing of Machinery parts

Machinery account Dr. (Amount of purchase)

VAT account Dr. (Amount of VAT on purchase)

Supplier’s Account Cr. (Total amount purchase price + VAT input)

For payment to supplier and Govt.

Supplier Account Dr. ( Total amount )

Bank account Cr.

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Accounting Education: Accounting Solution of VAT Problem of Plastic Bottle Manufacturing Co.
Accounting Solution of VAT Problem of Plastic Bottle Manufacturing Co.
Accounting Education
https://www.svtuition.org/2009/10/accounting-solution-of-vat-problem-of.html
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