Bartering, in simple words, is a trade-out of goods and services where there is no involvement of cash. On the other hand, accounting and tax is applicable only when values of these exchanged goods and services are accurately measured. It sounds complicated and sometimes it may be difficult to ascertain and measure the values of the bartered goods and services.
How does Barter accounting and tax work?
- The Barter arrangement should in written form. If it is a direct barter then two-party agreement must be made and if it is via agent then tri-party agreement must specify the agreed roles of each party. It entails transparency in the exchange and facilitates accounting.
- The registered barter broker agent must put down the mutually ascertained and agreed values of bartered goods and services in the agreement. That agreement must also indicate the concluding date of the agreement i.e. the date on which the obligations of the parties end, commission is paid and the barter is traded between both parties as per their expectations.
- With respect to taxing, since it involves exchange of goods and services, hence it attracts GST or VAT as applicable. The parties of said bartering agreement must highlight the income earned and expenditure incurred in trading and supplying the bartered goods and services. The Tax provisions must be read carefully in order to understand the tax liabilities as applicable on the realization value of the bartered goods.
- It also indicates the currency, payment systems or mode and other voucher exchange, if any.
We at onebarterindia.com have taken appropriate considerations about barter accounting and tax. In addition we have offered different modes of payment systems for the clients as per their needs and convenience.