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Accounting of service tax

rajeev (Accountant) (159 Points)

14 July 2012

I recently join a new propritory concern which is register under service tax ( Business Auxiliary )

They rece.commission for that first they raised Debit note.

eg.Commission 83768.86 + Service tax 12% 10052+ec.2%201+shec 1%101 =10354/-

We pay that service tax to govt. 10354/- & claim to Company all amount as per debit note.

The problem is that i am new with S.T.i want to pass accounting entries in Tally.

Which ledger should i opened under which head.

Kindly provide the help on this topics.any extra information required just mail me.

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10 Replies

Ayushi Agarwal (Article) (161 Points)
Replied 16 July 2012

You can pass the below entry:

Debtor's A/c Dr.

To Commission Income A/c

To Service Tax payable A/c

(with respective figures)

comm inc will go undr direct income

st payable will go undr currnt liab. & prov.

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Christopher Clark (NA) (55 Points)
Replied 17 July 2012

I am a accounting student i have 2 question first 1 is what is the service cost and what is the web site cost of browsing...

N.Naveena Maheswara Rao (Assistant manager for accounts) (1096 Points)
Replied 18 July 2012

Originally posted by : Ayushi Agarwal
	You can pass the below entry: Debtor's A/c Dr. To Commission Income A/c To Service Tax payable A/c (with respective figures) comm inc will go undr direct income st payable will go undr currnt liab. & prov.

Upon Payment of service tax, Debit Service tax payable a/c and credit bank a/c

Sheli Sehrawat (SAP Business Consultant) (767 Points)
Replied 18 July 2012

In my opinion, following should be the entries:

While Raising the debit note:

Debtors Debit 83768.86

Service tax recoverable Debit 10354

To Commission 83768.86

To Service tax payable 10354

When the payment is received:

Cash/Bank Debit 94122.86

To Debtors 83768.86

To Service Tax Recoverable 10354

This will help you differentiate and keep track of the service tax recoverable and revenue related debtors also.

Regards

Sheli

Pijush Roy (ERP SAP Functional Tester) (281 Points)
Replied 18 July 2012

Originally posted by : Sheli Sehrawat

In my opinion, following should be the entries:

While Raising the debit note:

Debtors                                            Debit     83768.86

Service tax recoverable                 Debit     10354

To Commission                                            83768.86

To Service tax payable                               10354

When the payment is received:

Cash/Bank                          Debit     94122.86

To Debtors                                          83768.86

To Service Tax Recoverable         10354

This will help you differentiate and keep track of the service tax recoverable and revenue related debtors also.

Regards

Sheli

everything is right but one problem ariess i.e. after payment of service tax, outstanding service tax payable account show for ......

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Sheli Sehrawat (SAP Business Consultant) (767 Points)
Replied 19 July 2012

@ Pijush .. I guess you didn't notice that there are two GLs for Service Tax.. 1. for the amount which is due to the customer (Service Tax Recoverable). 2. for the amount which is payable to govt. by the organisation (Service Tax Payable). When the organisation will pay the service tax amount to the govt., the following journal entry will be passed:

Service Tax Payable Debit

To Bank

So both account will be sttled against corresponding receipt/payment.

Regards

Sheli Sehrawat

Raghav (Audit & Accounts ) (30 Points)
Replied 19 July 2012

Yes...Sheli is right !!

rajeev (Accountant) (159 Points)
Replied 21 July 2012

Sheli

Good answer But the point remain Under which group i open above accounts.cuz.

We raised the debit note.Pay service tax to Govt.Same Claim from Company.

means we treated as service tax rece.from company but actually they pay only commission only. thats why we pay service tax & then claim.

Sheli Sehrawat (SAP Business Consultant) (767 Points)
Replied 23 July 2012

Originally posted by : rajeev
	Hi Sheli Good answer But the point remain Under which group i open above accounts.cuz. We raised the debit note.Pay service tax to Govt.Same Claim from Company. means we treated as service tax rece.from company but actually they pay only commission only. thats why we pay service tax & then claim.

Rajeev Sir,

The concept you told is absolutely right in case of normal logic. But as per the Service Tax Rules, if you receive Rs. 100 from customer against commision, by default the bifurcation will be assumed as follows:

Commision: Rs. 87.64

Service Tax : Rs.12

Edu Cess : Rs. 0.3

Sec & Higher Edu Cess : Rs. 0.06

So, the receivable should also be accounted.

Now, you said that we first pay to the Govt. and then claim the service tax from client company.

Sir, you must be knowing that even if customer doesn't pay you the service tax amount exclusively, your liability of paying service tax to the Govt. is not disolved. So in any case, you have to assume that any amount paid by customer includes Service Tax amount. So in the above example, you cannot account Rs. 12.36 as commission because that's against service tax. Its not your revenue but an Indirect Tax which should be received from client and paid to govt.

Further, I didn't get your ques about "head" under which it should be booked. Its a normal receivable and should come under current asset head.

Regards

Sheli

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1 Like

vikas (Accounts Executive) (25 Points)
Replied 01 April 2016

1	Create Liability and Asset by passing below entry
	Service tax Receivable	Dr
	Service Tax Payable	Cr

2	Paid Liability
	Service Tax payable	Dr
	Bank	Cr

3	Once the amt Recover from Party post below Entry
	Bank	Dr
	Service tax Received	Cr