Reversal charges mechanism in service tax
This query is : Resolved
05 December 2012
Hi Friends, please suggest me regarding entries in books of service provider and service receiver in case of reversal charges mechanism.
05 December 2012
In the books of service provider (in case of reverse charge mechanism):
No entry (if 100% payable by service receiver)
If partly by service provider and partly by service receiver then,
Debit: Bank (collected amount)
Credit: service tax liability
upon payment to govt:
Debit: service tax liability
Credit:Bank
In the books of service receiver (in case of reverse charge mechanism)
Debit : service tax cenvat credit (Current asset)
Credit: Service tax liability (current liability)
up on payment to Govt:
Service tax liability -Debit
Bank -credit.
Note : service tax credit you can claim only in the next month to the payment month.
No entry (if 100% payable by service receiver)
If partly by service provider and partly by service receiver then,
Debit: Bank (collected amount)
Credit: service tax liability
upon payment to govt:
Debit: service tax liability
Credit:Bank
In the books of service receiver (in case of reverse charge mechanism)
Debit : service tax cenvat credit (Current asset)
Credit: Service tax liability (current liability)
up on payment to Govt:
Service tax liability -Debit
Bank -credit.
Note : service tax credit you can claim only in the next month to the payment month.
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