12-15-2007, 06:57 PM
Dear Abdusalam,
Your query wise replies
1 - General Ledger entry for Purchases. ( Service & Retail Business ) GST,
Withholding, any other if possible.
Answer
When goods are purchased-
.......Purchases / stock / asset (DEBIT)
.......Sales tax receivable (DEBIT)
...................Supplier's / Vendor's Account (CREDIT)
When payment is made against purchase/outstanding balance of vendor-
.............Suplier's account (DEBIT)
.......................Bank account (CREDIT) or Cash account (CREDIT)
.......................Income tax deducted at source (CREDIT)
2 - Sales entry ( if customer company is exampted withholding tax, vise versa)
Answer
When sale is to be recorded-
................Debtor's account (DEBIT)
........................Sales account (CREDIT)
........................Sales tax payable account (CREDIT)
When payment is received from debtor against sales-
..............Bank account or Cash account (DEBIT)
........................Debtor's account (CREDIT)
If tax at source would be deducted, it will also be debited with the amount deducted by debtor while making the payment. Then this entry would be-
..............Bank account or Cash account (DEBIT)
..............Advance income tax (DEBIT)
..............................Debtor's account (CREDIT)
3 - Utility Bills Treatment
Answer
I could not understand what you mean by "treatment". Utility bills can be paid in cash and crossed bank payment is not compulsory. {see section 21 of the ITO 2001}. Its accounting entry would be as under
...................Utility expense (DEBIT)
...................Sales tax receivable (DEBIT)
...................Advance income tax (DEBIT)
.............................Bank account or Cash account (CREDIT)
4 - Authorized Cash Payment. ( as per allowed in ITO and for the purpose of Audit)
Answer
Maximum cash payment limit as per ITO 2001 is Rupees 10,000 for all transactions including salary. See section 21 of the ITO 2001.
As per circular issued by CBR, the limit for deduction of tax at source for purchases is Rs. 25,000 and for services is Rupees 10,000. If during a tax year the supply made by a supplier or services provided by a service provider are not above these limits, their tax at source may not be deducted by the person making payment to them.
5 - An employee awarded Salary 25,000 which consists 60% Basic, and 40% all
allowances. Except above company also pay employee cell phone bill blow 2000 p.m from petty cash. note if no bill then no award. what will be taxable salary ?
Answer
Since the year 2006, there is no concept of differentiation between basic salary and allowances in Pakistan. Only 10 % medical allowance (of gross salary excluding medical allowance) is allowed as a deduction. All other allowances are taxable and are included in salary for taxation purpose as per slabs given in first schedule of ITO 2001.
However, any payment made in shape of some re-imbursable expenses, against the expenditure incurred for carrying out the services or for employer's business purposes will be excluded from such taxable salary. For example if mobile phone is given to an employee for only and only official purpose and is also stricyly used as such, its bill's reimbursement will not make part of taxable salary of the employee.
6 - On what kind of services GST is applicable?
Answer
Services are covered under provincial sales tax ordinances issued most probably during 2000 or 2001 and is not covered in sales tax act 1990. These services are almost 8 or 10. These include for example, services of laundries, beauty parlures, courriers etc.
7 - What kind of complication can be faced while auditing. (in prospactive of Sales
Tax Specially.)
Answer
It requires a very long delibration which is not possible on this forum. You can see the audit programmes and checklists developed by some audit firm if u r a trainee. Audit checklists and plans are also developed by sales tax collectorates and CBR which are also available through rare sources. However, in brief, while doing audit two things have to be kept in view. First, no non-compliance should be there and if it is, it shud be pointed out. Second, there should be no loss to govermnetal exchequre. If it is there, it should be reported.
Hope you would find it beneficial.
Regards,
Kamran.
Your query wise replies
1 - General Ledger entry for Purchases. ( Service & Retail Business ) GST,
Withholding, any other if possible.
Answer
When goods are purchased-
.......Purchases / stock / asset (DEBIT)
.......Sales tax receivable (DEBIT)
...................Supplier's / Vendor's Account (CREDIT)
When payment is made against purchase/outstanding balance of vendor-
.............Suplier's account (DEBIT)
.......................Bank account (CREDIT) or Cash account (CREDIT)
.......................Income tax deducted at source (CREDIT)
2 - Sales entry ( if customer company is exampted withholding tax, vise versa)
Answer
When sale is to be recorded-
................Debtor's account (DEBIT)
........................Sales account (CREDIT)
........................Sales tax payable account (CREDIT)
When payment is received from debtor against sales-
..............Bank account or Cash account (DEBIT)
........................Debtor's account (CREDIT)
If tax at source would be deducted, it will also be debited with the amount deducted by debtor while making the payment. Then this entry would be-
..............Bank account or Cash account (DEBIT)
..............Advance income tax (DEBIT)
..............................Debtor's account (CREDIT)
3 - Utility Bills Treatment
Answer
I could not understand what you mean by "treatment". Utility bills can be paid in cash and crossed bank payment is not compulsory. {see section 21 of the ITO 2001}. Its accounting entry would be as under
...................Utility expense (DEBIT)
...................Sales tax receivable (DEBIT)
...................Advance income tax (DEBIT)
.............................Bank account or Cash account (CREDIT)
4 - Authorized Cash Payment. ( as per allowed in ITO and for the purpose of Audit)
Answer
Maximum cash payment limit as per ITO 2001 is Rupees 10,000 for all transactions including salary. See section 21 of the ITO 2001.
As per circular issued by CBR, the limit for deduction of tax at source for purchases is Rs. 25,000 and for services is Rupees 10,000. If during a tax year the supply made by a supplier or services provided by a service provider are not above these limits, their tax at source may not be deducted by the person making payment to them.
5 - An employee awarded Salary 25,000 which consists 60% Basic, and 40% all
allowances. Except above company also pay employee cell phone bill blow 2000 p.m from petty cash. note if no bill then no award. what will be taxable salary ?
Answer
Since the year 2006, there is no concept of differentiation between basic salary and allowances in Pakistan. Only 10 % medical allowance (of gross salary excluding medical allowance) is allowed as a deduction. All other allowances are taxable and are included in salary for taxation purpose as per slabs given in first schedule of ITO 2001.
However, any payment made in shape of some re-imbursable expenses, against the expenditure incurred for carrying out the services or for employer's business purposes will be excluded from such taxable salary. For example if mobile phone is given to an employee for only and only official purpose and is also stricyly used as such, its bill's reimbursement will not make part of taxable salary of the employee.
6 - On what kind of services GST is applicable?
Answer
Services are covered under provincial sales tax ordinances issued most probably during 2000 or 2001 and is not covered in sales tax act 1990. These services are almost 8 or 10. These include for example, services of laundries, beauty parlures, courriers etc.
7 - What kind of complication can be faced while auditing. (in prospactive of Sales
Tax Specially.)
Answer
It requires a very long delibration which is not possible on this forum. You can see the audit programmes and checklists developed by some audit firm if u r a trainee. Audit checklists and plans are also developed by sales tax collectorates and CBR which are also available through rare sources. However, in brief, while doing audit two things have to be kept in view. First, no non-compliance should be there and if it is, it shud be pointed out. Second, there should be no loss to govermnetal exchequre. If it is there, it should be reported.
Hope you would find it beneficial.
Regards,
Kamran.
