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When goods are returned, how about the Tax collected on
them.? The Buyer or the seller who will bear that /

Question Posted / ajin mathew

Answer Posted / ajin mathew

This question can be answered on 2 viewpoints:

1.Buyer's point of view:

Here purchase is credited and the party should be debited if it is a credit purchase. here the buyer pays the tax and if he returns the goods due to damage or any other reasons the seller is liable to pay him the price which includes the tax amount also.So the entry is

Party(seller)a/c Dr


To Purchase Return

To Input VAT

2. Seller's point of view

Here Sales is debited and the party should be credited if it is a credit sales.Here the seller collects the tax and he is liable to pay back the buyer his price which includes the tax collected by him.the entry is:


Sales Return a/c Dr

Output Tax Dr


To Party(Buyer)a/c

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