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Payment (advance) to X Company for Value of AED/- which include the5% VAT for the supply of goods & service (which they would carry out only after the receipt of payments) How to treat Input VAT, when we make an advance payment to supplier towards their services or supply of good. Do we need to book input VAT while be process this advance payment ? Or We need the book the input VAT only when the invoice we received from the supplier which is in the future date ?
YOU NEED TO PAY VAT FOR ANY ADVANCE RECEIVED FOR GOODS OR SERVICES, IF THE SUPPLY IS NOT FULFILLED IN THE SAME PERIOD, WHEN A SALES INVOICE IS RAISED AGAINST AN ADVANCE RECEIVED IN A DIFFERENT TAX PERIOD, YOU NEED TO ADJUST THE SALES WITH THE ADVANCE AND REVERSE THE TAX TAX LIABILITY GENERATED FOR THE ADVANCE RECEIVED.
Yes , Any avance paid or received VAT and Tax invocie is required.
We need to book input VAT while making advance payment, as VAT should be remitted on cash basis, after the company has paid the supplier, the latter should provide invoice to support the company's claim for the input VAT.
Advance paid is not paid out of the bill, it's a random amount paid. Input vat is booked only when the bill is prepared, so it is booked when we recieve invoice from the supplier in future date.
When a company receive advance it is treated as liability and no need to charge vat on that amount. VAT is calculated at the time of preparation of invoice. After charging the vat to the principal amount excess if any is paid to the supplier. Amount received in adavnce is not a service. it is treated as Current liability.
No Need we record the Advance payment when we received the Tax Invoice then we record the VAT with Purchases
Advance can be given against proforma invoice and input VAt can avail only at the time of receipt of original invoice along with the receipts of taxable supplies.
Yes. VAT shall be accounted for while making advance payment against only taxable supplies.
we have 2 options . 1st is we should book the vat amount if the all the goods are going to be received the the same months. and 2nd option is we can ook and cancel the the entry at the month end
Advices to book VAT for advances, for which the goods are not receiving in the current month. In this case pass entry for the VAT @ 5%. You can cancel the VAT entry after receiving the goods by cancelling the entry passed for VAT on advances.
First of all while making advance payment, you pass the entry:
Creditors A/c Dr
To Cash/Bank Cr.
Therefore in creditors account, it will appear as advance given to creditors (Debit Balance)
Then while receiving the Invoice & Goods later, you pass the entry:
Purchase A/c Dr.
Input VAT A/c Dr.
To Creditors A/c Cr.
From above entry you can see, you have booked INPUT VAT only on receipt of Goods & Invoice which is correct as per VAT LAW.
Since you must have Tax Invoice to claim INPUT TAX CREDIT.
I hope your doubt is clarified.
