Paragraph 8 of Ind AS 18, inter alia, provides that revenue includes only the gross inflows of economic benefits received and receivable by the entity on its own account. Amounts collected on behalf of third parties such as sales taxes, goods and services taxes and value added taxes are not economic benefits which flow to the entity and do not result in increases in equity. Therefore, they are excluded from revenue.
Excise duty is a liability of the manufacturer which forms part of the cost of production, irrespective whether the goods are sold or not. Therefore, recovery of excise duty flows to the entity on its own account and the same should be included in the amount of revenue.
Ind-AS 18, Revenue, does not specifically prescribe any guidance for presentation of excise duty. However, under Ind AS reporting framework, revenue from sale of products is presented by including the Excise Duty. As per Division – II of Schedule III to the Companies Act, 2013 (i.e. Ind AS based Schedule III) – Note 3 of General Instructions for Preparation of Statement of Profit and Loss, provides that revenue from operations shall disclose separately in the notes:
- sale of products (including Excise Duty);
- sale of services; and
- other operating revenues.
In view of above, since the revenue is the gross amount including excise duty, in the statement of profit and loss prepared under Ind AS, the excise duty should be reflected as an expense.
(Clarification as given in Clarification Bulletin 4 issued by Ind AS Transition Facilitation Group (ITFG) formed by ICAI)