Information on Import Transactions of Goods Accounting Process – GST viz a viz AS 11
This Article relates to the nuances of the GST framework for Import Trade viz a viz the challenges ordered down whereas sticking to the principle AS 11 – The Consequences of Changes in exchange Rates Lets perceive a typical Import illustration –
|Date||Transaction||Custom Rate||RBI Rate||SBI Rate|
|Auditors preferred ( though RBI archives do not provide now and it is now sourced from geojit.com)||Company’s Management Preference|
|26.03.2021||A provider from Germany the products on a vessel bound to India having invoice worth of USD 10,000 on CIF basis owed in 90 days from B/L||1 USD = INR 73.25||1 USD = INR 73.25||1 USD = INR 73.80|
|27.03.2021||Bill of Lading Date||1 USD = INR 73.25||1 USD = INR 73.40||1 USD = INR 73.85|
|28.03.2021||The Customer got the documents viz Bill of Lading, Invoice copy, Packing List. The date on B/L is 27.03.2021||1 USD = INR 73.25||1 USD = INR 73.00||1 USD = INR 73.50|
|31.3.2021||Year End Date||1 USD = INR 73.35||1 USD = INR 73.50||1 USD = INR 74.00|
|30.04.2021||The Bill of Entry is filed by the customer in India||1 USD = INR 74.00||1 USD = INR 74.10||1 USD = INR=74.60|
|01.05.2021||The Customer’s CHA has cleared the goods from the customs and the goods are supplied to the buyer’s warehouse the same day||1 USD = INR 74.00||1 USD = INR 74.25||1 USD = INR 74.65|
Under CIF the risk in the Goods is passed from the seller to the buyer during the period the goods are loaded and stowed onboard the vessel. – Assumed
|Question||Answers according to Accounting Standard|
|When should the Buyer go for this purchase||The Buyer ought to recognize the Import Purchase on 27.03.2021 ideally however since there’s no document offered as thereon the date, it’s well to record the Import Purchase on 28.03.2021 ( the date on that the bill of payload copy etc is received from the vendor )|
|Whether the outstanding quantity of USD 10,000 collectible to the German merchant be restated as per AS 11 on 31.03.2021?||Yes. The exchange gain/loss applied on account of the payables in foreign currency must be restated as per AS 11|
|How would such stock not lying with us be reported in the Financials as of 31.03.2021? Will it be restarted?||The Stock tho’ not lying with us in real-time however the risks and rewards of the stock are currently lying with us, therefore such stock would be reported within the financials as “Goods In Transit” forming a section of the “Closing Stock” below “Current Assets”. As per AS eleven, Stock being a Non-Monetary item shall not be restarted.|
|How can a question from the GST Department for Import Booking in FY 2020-21 with no corresponding bill of entry, customs, and IGST payment similar to such purchase be explained?||The explanation would counsel that the transaction may be a part of the reconciliation of the entire Purchase product|of products} being goods in transit.|
|How can a question from the GST Department for Import Booking in FY 2021-22 with no corresponding import purchase considering such customs and IGST payment be explained?||The explanation would counsel that the transaction could be a part of the reconciliation of the whole Purchase product being goods in transit.|
If you thought all your queries were answered satisfactorily, then let’s return to the confusing portion
of Confusion 1. If the date of recording is finalized, let’s terminate that conversion rate we tend to shall apply.
Confusion 2 – Whereas the customs bill of entry suggests a really conclusive proof for a conversion rate that is appropriate and even be simply explained to the GST Department or for that matter revenue enhancement department, the date of recording of the Import Purchase would once more have a distinct conversion rate
Confusion 3 –
The Import price on the date of accounting i.e 28.03.2021 is INR. 7,30,000 ( RBI Rate – most well-liked by Auditors )
Thus the particular value of my product on the day the bill of entry was filed would be INR 7,40,000 ( as per Customs rate )
Additional, if the acquisition is born-again at the SBI rate that is the closest rate at that the particular payment would turn up, the stock would worth at INR 7,35,000.
MANAGEMENT WORRIES one. therefore the Management is currently troubled by the actual fact that the language of business is the language of accounts?
2. Whether or not the cost accounting of the stock provided by the businessperson is correct or they’re truly creating lesser margins supported by incorrect cost accounting details provided by the accountant?
3. And if recording the transactions in line with the Accounting standards however not in simple the GST and tax Law, wherever they might find yourself paying the administrative cost?
4. And if the recording of transactions in line with accounting standards solely would cause a material misstatement whereas the money statements are entailed?
1. No matter the conversion rate you select i.e run / SBI / Customs / Xe.com / OANDA.com – apply systematically year on year basis.
2. If you felt that the distinction in purchase amounts above from 7.3 Lakhs to 7.4 Lakhs to 7.5 lakhs isn’t one thing material, imagine that if it’s a contract price of USD 10 Lakhs or the changes in the exchange rate is at least 3 to 5 Rupees that is incredibly a lot of doable or if having at least ten consignments that are in Transit as on the year finish 31 March
3. The below opinion shall not apply just in case of Import transactions that are ultimately sold on High seas sales basis
IN MY OPINION – Emphasis Supplied
There’s only 1 straight jacket formula or opinion within this case –
It’s well to record an Import Purchase on the date mentioned on the Bill of Entry with the applicable conversion rate mentioned along with the tariff and IGST amount which might even be regenerate on identical conversion rate. This would achieve
1. Cost accounting Aspects of the Stock would be additional applicable
2. Clarity throughout GST still as tax Assessments
3. Will not be a material misstatement of the money Statements.
4. Simple Recording – to the accountant
5. Administrative Convenience – No reconciliations
6. Mismatched Possibilities reduced between the Customs and therefore the tax data
Let me know your feedback and queries on this. Also, if you wish the same article on the Export Leg of products, mention it within the comment below.
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