Coversion rate for service tax on FE payments

This query is : Open

s sampath (Querist)
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30 October 2010 Sir,
My company is working on SAP module. In case of services obtained and bills received from a foreign service provider, our engineers will make a SERVICE ENTRY in system for invoice value for which system will create the liability entry in books by taking the Mean Exchange rate from system. When the finance team releases the payment at a later date, system will create an entry for service tax at the conversion rate at which the liability has been created while SERVICE ENTRY is made irrespective of the rate at which the actual payment takes place at a later date. This creates a problem with service tax people that there is a difference in fluctuation in actual service tax due on payment date compared to the liability creation date. Is there any guideline in service tax for conversion of FE payments for the purpose of arriving service tax amount?

CA Shailesh Kumar Bhagat

CA Shailesh Kumar Bhagat (Expert)
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30 October 2010 See, one thing is very much clear, service tax is payble only after releasing the payment not against the liability creation.

Everyone should understand this, whether EIC or tax authority. Your company is going by correct practice as per the law.