Accounting and Tax treatment of Retail Mobile Shop

Question Asked by Student


I am the regular e-mail reader of your accounting education site and I learned extra which I don't know. thanks for it.
but I have still facing the problem about accounting and tax rule of retail mobile shop in which the translation are as under :

*** purchase the recharge coupon & mobile easy recharge balance with commission

*** sale the recharge coupon & mobile easy recharge balance with mrp.


so ,in this case , what the rules and regulation are affected in the account of this type of business. also says about the tax rules .and vat is applicable or not ?

i hope i would find my answer early if possible.

thanks.



Answer from Accounting Teacher


I think that you are operating your self -employed shop which comes under sole trade . I also think that you are operating tally software .

Because recharge coupon is your business stock , so you will deal it simply current assets .

first of all , you have to make stock item and stock measurement , I think also that you purchase it on per piece basis . Then pass the following journal entry .

Purchase account ( under Purchase account ) Dr.

Bank Account ( Under bank Account )Cr.

If you have keep tally in single mode then , you need not pass above entry , just click purchase voucher and take account type bank and fill , your item not only recharge coupon but also , if you have purchase any mobile of different companies , that can also write here and , accept purchase voucher in tally 9 .

I think , you have obtained commission when , you sell it to customer , then it can be showed as your income and pass the voucher entry of receiving amount in receipt voucher . If you sell easy recharge coupon and you have earned money it will also pass voucher entry of sale in single mode .

or if you want to double entry mode then

bank account dr.

sale account cr.


Tax treatment of Mobile Shop business


income tax

Income tax is one sole trade is your personal expense , so it will not show in your business record , if you have taken any money from business for paying income tax it will be your drawing and you will capital of business will be reduce with same amount

Here is the income tax rate slab and according to this , you have to pay your income tax .

Taxable income slab (Rs.) Rate (%)

Up to 1,50,000 Up to 1,80,000 (for women)Up to 2,25,000 (for resident individual of 65 years or above) → NIL



1,50,001 - 3,00,000 → 10 %



3,00,001 - 5,00,000 → 20 %



5,00,001 upwards → 30%


*A surcharge of 10 per cent of the total tax liability is applicable where the total income exceeds Rs 1,000,000.


Note: Education cess is applicable @ 3 per cent on income tax, inclusive of surcharge if there is any.


VAT

VAT is on sale of recharge coupon is 4 % . In law , it is duty of businessman who sells these card , have to pay VAT 4 % but , you can get credit or you can deduct the amount of VAT which is included when you bought these recharge coupons .

Suppose , you are retailer and buy recharge coupon at Rs. 300 with VAT Rs. 12

Now , if you sell it at Rs. 400 include VAT Rs. 16 , then you will deposit VAT to Govt

= Output VAT - Input VAT = Rs. 16 - Rs. 12 = Rs. 4


Service Tax

There is no service tax , because you are not providing any service .

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