Sales Tax Refund

[Mathurthi RamKumar]

Greeting to all,

We received sales tax refund from state government paid in 3 years back.(actually it paid for machinery purchase) I want to know hw to accounting for above. Any Income Tax rules to be noted for this?

Kindly guide me.

Regards

M.RamKumar

AI Summary

Sales tax refund: treat as income if originally expensed or reverse a recoverable asset on receipt to reflect recovery.
Treatment of a sales tax refund follows the original accounting: if VAT was expensed, the refund is recognised as income; alternatively, record VAT paid as a current asset Other Taxes Recoverable and on receipt reverse that asset by debiting bank and crediting the recoverable, rather than booking fresh income.