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Originally posted by : dany krishna prasad .v |
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When iam working with a firm which is engaged in rendering Architech services which attracts service tax I have few queries in this regard :-
Method of Accounting:Mercantile System
1) . whether Service tax liability should be created while we raise a bill , If so ,subsequently the bill became bad or part of the bill was realised how to treat the unrealised service tax in the closing balance sheet and how it should be nullified in the next year.
PLZ give detailed explanation if possible with a suitable example. |
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Yes.service tax liability should be created while we raise a bill .
The accounting entry of issuing an invoice for service provided or rendered to the client would be as per the following:
Service Recipient A/c…………………………Dr
Service Rendered A/c………………………Cr
Service Tax Liability A/c……………………Cr
Education Cess Liability A/c………………Cr
S & H Education Cess Liability A/c…….…Cr
Note: - although service tax charged on bill has been transferred to service tax liability account but the liability of payment of service tax arises only after payment received.
The basic entry at the time of receiving payment would be as per the following:
Cash/Bank A/c…………………………………Dr
Service Recipient A/c………………………Cr
Service tax for the services rendered becomes payable to the credit of the Central Government on receipt of the payment for such rendered services, hence at the time of receiving the payment following adjustment entry is required to be passed at the time of receipt of payment:
Service Tax Liability A/c………………….…………Dr
Education Cess Liability A/c…………………….….Dr
S & H Education Cess Liability A/c………….…….Dr
Service Tax Payable A/c……………………….Cr
Education Cess Payable A/c…………………..Cr
S & H Education Cess Payable A/c…………...Cr
In case of a bad debt, following entry should be passed:
Bad Debt A/c…………………………………Dr
Service Tax Liability A/c………………….…………Dr
Education Cess Liability A/c…………………….….Dr
S & H Education Cess Liability A/c………….…….Dr
Service Recipient A/c………………………Cr
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