Accounting for Export Transactions of Goods – GST viz a viz AS AS 9 & 11

Accounting for Export Transactions of Goods – GST viz a viz Accounting Standard AS 9 and 11

This Article deals with the nuances of the GST framework for Export Trade viz a viz the challenges laid down while adhering to the Accounting Standard AS 9 – Revenue Recognition and 11 – The  Effects of Changes in Foreign Exchange Rates

Lets understand a typical Export illustration –

Under CIF the risk in the goods passes from the seller to the buyer at the time the goods are loaded and stowed on board the vessel. – Assumed

If you thought all you questions were answered satisfactorily, then lets come to the confusing part.

Confusion 1 – If the date of recording is finalised, lets finalise which conversion rate we shall apply.

Confusion 2 – While the customs shipping bill suggests a very conclusive proof for a conversion rate which is acceptable and also be easily explained to the GST Department or for that matter Income Tax department however, the date of recording of the Export Sales would again have a different conversion rate.

Confusion 3 –

The Export Sales price on the date of accounting i.e 02.04.2021 is INR 7,30,000 (RBI Rate – preferred by Auditors)

Hence the actual sales value of my goods on the day the shipping bill was filed would be INR 7,33,500 (as per Customs rate)

Further, if the sales is converted at the SBI rate which is closest rate at which the actual inward remittance would take place, the stock would value at INR 7,35,000

MANAGEMENT WORRIES

1. So the Management is now worried to the fact if the language of business is the language of accounts ?

2. Whether the selling price of the stock provided by the Accountant is correct or they are actually reporting lesser sales turnover ( and more exchange gain loss ) based on exchange rate difference ?

3. And if recording the transactions in line with the Accounting standards but not in ease of the GST and Income Tax Law , where they would end up paying more administrative costs ?

4. And if the recording of transactions in line with accounting standards only would lead to a material misstatement while the financial statements are drawn up ?

REMARKS

1. Whatever conversion rate you choose i.e RBI / SBI / Customs / XE.com / OANDA.com – apply consistently year on year basis.

2. If you felt that the difference in sales amounts above from 7.3 Lakhs to 7.335 Lakhs to 7.35lakhs is not something material, imagine that if it’s a contract worth USD 10 lakh or the changes in exchange rate is atleast 3 to 5 Rupees which is very much possible or if you are an Exporter having atleast 10 consignments which are in Transit as on the year end 31^st March

3. In case of Third Country Exports i.e OUT AND OUT Sales, purchase and sales shall be recorded on the invoice date at the customs rate effective on the said date

IN MY OPINION – emphasis supplied

There is only one straight jacket formula or opinion in this case –

It is advisable to record a Export Sales on the date of invoice itself with the applicable conversion rate mentioned on the shipping bill

This would achieve

1. Sales Turnover of the Stock would be more appropriate

2. Clarity during GST as well as Income Tax Assessments

3. Will not be a Material Misstatement of the Financial Statements

4. Ease of Recording – to the Accountant

5. Administrative Convenience – No reconciliations

6. Mismatch possibilities reduced between the Customs and the Income Tax Data

Let me know your feedbacks and questions on this.

Author Details: CA Raj Doshi, Prop. R C  D & Co., Chartered Accountants Email : [email protected], Mobile : 9820803593

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