Imports and Export of goods and services is common in any business. And there are customs regulations which monitors the imports and exports.
Whenever import purchases are done, customs will levy various types of taxes like., GST, Basic Customs duty, CVD, SAD, Cess etc. For accounting purpose we categorize them into claimable as ITC Credit and not claimable expenditure.
Generally all imports and exports will be handled through clearing and forwarding agent. He will pay all the duties to customs personnel on behalf of importer and importer will reimburse to him later on.
Apart from those taxes, C&F Agent will charge the C&F Charges for the services he provided and charge local taxes applicable on it, like GST. The C&F agent will raise a bill to the importer stating all his expenses and reimbursement of duties he paid on behalf of importer.
Since reimbursement expenses not subject to any levy of GST, C&F Agent will levy GST only on services he provided. Reimbursement charges might include Customs duty, warehouse charges, Freight charges on imports etc.
Will see now how accounting entries will be passed for the above scenario of cases.
Accounting for Imports purchase:
1) Import Purchases Entry
Import Purchases A/c Dr
To Party A/c
(Values can be accounted as per exchange rate mentioned in the bill)
2) Customs Duty Payable Entry
Customs Duty A/c Dr
To *C&F Agent A/c
(*If customs duty reimbursed to C&F Agent)
3) ITC Stat Adjustment entry
Input IGST A/c Dr
To Customs Duty A/c
(Only those taxes can be claimed as credit shall be debited, rest all the taxes will occupy the place customs duty ledger)
4) Payment Entry along with Exchange Rate Fluctuation
Supplier A/c Dr
**Foreign Exchange Gain/Loss A/c Dr (If Loss)
To Bank A/c
To **Foreign Exchange Gain/Loss A/c ( If gain is there).
(** Debit - if loss in foreign exchange, Credit- if gain in foreign exchange)
Accounting for Clearing and Forwarding Charges:
1) Expenses Due Entry.
C&F Charges A/c Dr
Input CGST/SGST A/c Dr
To TDS U/S 194C A/c
To C&F Party A/c
2) Payment Entry
C&F Party A/c Dr
To Bank A/c
Passing the above entries ensures the completeness of accounting of import purchases.
Similarly, accounting of exports will have the same process of accounting.