eKTP 58

Why Stock Take under Income Tax and GST?
Part 1 of 2 

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Conduct stock take for Tax Saving and meetregulation requirements.

 

What is stock take?

  • To count and check the goods on hand in a shop or business

  • To reassess one's current situation, progress, prospects, etc

  • A count and check of goods on hand in a shop or business

  • A reassessment of one's current situation, progress, prospects, etc

Reference: Collins English Dictionary. Copyright © HarperCollins Publishers

 

Why stock take is important under Income Tax?

2.1 Inventory written off or lost

  • Stock lost and stock obsolescence have to immediately identified and written off in order to claim tax deduction.

  • In respect of undisposed long period stock. It is better to written down the stock to net realisable value.

  • To claim above tax deduction, the Company need to have documentary evidence.


2.2 Stock in trade withdrawn for own use

  • If there is any stock trade withdrawn for own use shall recognised as sales at market value.

Reference: Public Ruling No. 4/2006 Valuation of stock in trade and work in progress.

 

Why stock take is important under GST?

3.1 Stock written off

  • Input tax credit is allowable for expired or damaged and subsequently written-off and destroyed goods.

  • If the written-off goods are sold as scrap, it is subject to GST 6% and the company has to issue a tax invoice.

  • For written-off goods which are disposed off other than by sale, GST registered person is required to keep the related documents as proof that the goods have been written-off and disposed.

Reference: General_Guide_24082017

3.2 Unexplained stock quantity loss

  • According to Section 43(5)(d) of the GST Act 2014, DG may access the amount of tax that would have been chargeable for unexplained stock quantity loss.

  • If no voluntary adjustment made (voluntary account for the output tax) and Custom found out, custom may value the stock at open market value. Fine and penalty may also apply.