Entries regarding service tax - most urgent - Service Tax

harsh (ca ) (109 Points)
Replied 12 December 2011

Dear

Service tax is collected on behalf of the govt. Therefor, its a current liability.

However, Revenue of Mr. X is Rs.100,000/-.

Entry is:

Mr.Y Dr.110,300/-

Revenue Cr.100,000/-

Service tax Payable 10,300/-

Thanks

Harsh Gupta

1 Like

Giridhar S Karandikar (Team Lead) (7548 Points)
Replied 12 December 2011

You can book the entry in the P&L as follows:

Bank A/C Dr 110300

To Commission Inc 100000

To Service Tax 10300

And while making the payment of service tax post the following entry

Service-Tax Dr 10300

To Bank 10300

So you can book the entry either way as showed by me above or as posted by Mr Y. But I think booking the entry as showed above would be the correct way, as the whole amount is your revenue out of which you are paying some amt to the Govt.

Same way in the case of booking the expense say in case of audit fee, we book the whole of the expense to the P&L of say Rs.30000 & then part of it is shown as TDS payable & the balance shown as payable to the auditor while making the provision, so I think for commission income also the same procedure be followed.

1 Like

KARANDEEP,CA,B.Com,CS FNL (JOB) (457 Points)
Replied 12 December 2011

Yes,Mr Y is correct,because as per income tax provision you have to book the total income including the service tax and if you paid the service tax before the due date of filing the ITR, Then u will get the deduction of service tax paid as an expenses.

Thanks & Regards

Karandeep

1 Like

Nitil Kr. Agarwala (Persuing CS) (264 Points)
Replied 12 December 2011

Karandeep Sir,

Ok with your theory. Now suppose that Tax Audit Thrasehold limit is 60 Lac. After that, we have to audit our books and its mandatory. As per your suggetion, if in future Mr. X receive commission of Rs. 50 Lac and Service Tax of Rs. 10 Lac and he combines the both and book the total 60 lac as his income, than he comes under VAT Audit limit and he have to go for the same?

Now just want to clear that, which income tax provision rules says to book Revenue collected on Govt. A/c to our own turnover and what if the above sceans arises on applying the same?

Regards

Nitil Kumar Agarwala

Nitil Kr. Agarwala (Persuing CS) (264 Points)
Replied 12 December 2011

Sorry Its Tax Audit not VAT Audit.......

KARANDEEP,CA,B.Com,CS FNL (JOB) (457 Points)
Replied 13 December 2011

Dear Sir,

as per Sec-43,some deduction are allowed only on payment basis and not on due basis even if the books are kept on mercantile system, so from the above section cover the section 37(1) in which any tax,duty,cess.or fee- like sale tax,service tax,excises duty ,muncipal tax,etc are not allowed as deduction if not paid before the due date of ROI.

Now the answer for your question that will service tax is to be considered for the purpose of total gross recepits,yes receipts to ne taken on gross basis including service tax which is given in the case law CIT vs United Cardamom Auctioners (2007).

Now i hope your query is resolved

Thanks & Regards

Karandeep

1 Like

CA Mukesh Soni (Practicing Chartered Accountant) (55 Points)
Replied 15 December 2011

Dear All,

Why you are making him confuss

He is correct in his part

his query is How much to show as revenue.

Mr. Agarwala yoou are correct as per income tax act you can not show service tax payable as your revenue.

correct entry

Debtor's A/c Dr. Rs.100000

To Revenue Rs.89700

To Service Tax payable Rs.10300 all the best

1 Like

CA Mukesh Soni (Practicing Chartered Accountant) (55 Points)
Replied 15 December 2011

Dear All,

Why you are making him confuss

He is correct in his part

his query is How much to show as revenue.

Mr. Agarwala yoou are correct as per income tax act you can not show service tax payable as your revenue.

correct entry

Debtor's A/c Dr. Rs. 100000

To Revenue Rs. 89700

To Service Tax payable Rs. 10300 all the best

Sunil (Internal Auditor) (334 Points)
Replied 15 December 2011

Dear Nitil

Its is depending up on what you shown it in the invoice. if the invoice is in the following format like

Commission 89700/-

ST 10300/-

Total 100000/-

Then Mr. X is correct

If the invoice is in the following format

Commission 100000/-

Total 100000/-

Then you have not collected service tax from client. In such cases the service tax is your expenses and in such cases the amount of RS.10300 is to be paid from your poket. So in such case you have to pass the entry as said by mr. Y.

1 Like

Nitil Kr. Agarwala (Persuing CS) (264 Points)
Replied 17 December 2011

Dear Sunil SIr,

Mr. X had raised the invoice as follows :-

Commission 89,700/-

ST 10,300/-

Total 1,00,000/-

Also a matter of fact is that Mr. Y is a seniour consultant and tax practisioner and is being practising since last 25 yrs +. Now how may i say that his suggesion is completely wrong and on which ground i should argue seniors when i have no case judgement or any other case study which may provide me any strength. I am totally confused.

Kindly guide me on above.

Thanks

Nitil Agarwala

Nitin Jain (CA) (39 Points)
Replied 20 December 2011

Don't Be confused.

There is some confusion in data you present. coz the ST liability should be on the revenue i.e 89700* 10.30% = 9240. So the invoice prepared by Mr X to be checked again

therefore the entry will be as follows:

Client dr. 100000

Revenue (Net of ST and Cess)

Unpaid Service Tax (ST - basic)

unpaid Cess (Cess Amounts)

Further after amendement in the service tax provision (related to the point of taxation) we have to follow the same entries. the entries purposed by mr Y could be relevant before the amendement. Coz that time ST required to be deposit on collection not on the basis of raising of invoice. but now invoice and acceptance to be made within 14 days from the date of service and ST to be deposit accordingly.

Income tax audit(Gross Receipts) word includes all type of tax and duties. therefore service tax will be consider as a part of revenue and added back for evaluating the Cap.

Regards