Sushma Prabhakar (Finance) (45 Points)
10 June 2009There are 2chartered accountant firms X & Y. X gets the clients to Y. Y carries out all the work & signs the audit report by himself. Y bills it to X.X bills the same amount to the client. The appointment letter is in the name of X. So for whom is the service tax applicable? whether to X or to Y or to both?
Here X is not doing any other work except getting the client to Y.
Pls clarify regarding this if any1 has any idea...
Satish
(CA Final Student)
(479 Points)
Replied 10 June 2009
Is it happens Sushma?? If yes, then both of them r liable to service tax. X will charge to the client & y will charge to X. In turn, X will take credit of service tax as an input service.
Sushma Prabhakar
(Finance)
(45 Points)
Replied 10 June 2009
Hi Satish,
Say the amount of fees is Rs.10,000/-. At 10% service tax, the net amount receivable by Y is Rs. 9,000/- & what abt X? will he get input credit of Rs.1,000/- on Rs.10,000?
In that case, X will have a benefit to the extent of service tax portion for every client right?
RAMANJU
(here to updating the knowledge)
(485 Points)
Replied 10 June 2009
Kshitij Saxena
(CA Final)
(256 Points)
Replied 10 June 2009
To Sushma,
Both will be liable for service tax on their own billings however if there total billing for the year (TAKING SEPARATELY)is below Rs.10 lac they both can get away with it i.e. there is no need for them to charge service tax
Kshitij Saxena
(CA Final)
(256 Points)
Replied 10 June 2009
To viyay ji,
Sir please specify if you are running an individual business or some charity work.Any ways plz find an attached document herewith to further help you
I request all other sr. members to amend it if it lacking something
Satish
(CA Final Student)
(479 Points)
Replied 11 June 2009
Hi Sushma, it seems there is some confusion in ur mind. After completion of work Y will charge to X, Rs. 10000+1030 (service tax thereon @ 10.30%). In turn, X will charge to the client, say 12000+1236 (service tax thereon @ 10.30%). When X will receive the money from client, his liability will be crystalised. Also when he pays to Y, he is entitle to avail and utilise cenvat credit. Y will pay to the government Rs. 1030 and X will pay to the governemnt (1236-1030) = 206. I hope u understood this example
Dear Vijay
you Can make Income & expenditure account as per following
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Income & Expenditure Account |
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for the period of ………………………. |
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Expenditure |
Amount |
Income |
Amount |
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To Telephone Expenses |
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By Income from Fees received |
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To Salary Expenses |
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By Income from Bank Interest |
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To Postage & Courier |
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By Income from Rent |
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To Rates & Taxes |
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By income from Royalty |
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To Conveyance Expenses |
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To Misc Expenses |
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To Excess of Expenditure over Income |
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(Balance Figure (trf to B/s) |
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To Excess of Income over Expenditure |
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(Balance Figure (trf to B/s) |
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Total |
0 |
Total |
0 |
Balance of this account should be c/f to Balance Sheet. Balance either Expenses over Income or Income over expenses.
Hope this will help you
If there is any confusion please mailed me at raj_eshgoyal @ yahoo.co.in
Sushma Prabhakar
(Finance)
(45 Points)
Replied 12 June 2009
hey satish,
There is no problem if X is billing more amount to client than what Y is charging to X. But the issue is Y is charging say Rs.10,000/- on X. X is also billing the client same amount. he is not charging anything extra as commission or something. then my question is why is X doing this? when he doesnot have any benefit. so there will be some benefit to X. what benefit is that. Is it evading any tax? that i want to know..
Satish
(CA Final Student)
(479 Points)
Replied 13 June 2009
Why X would have done this business evenif there would not have been any service tax??? Nobody would have charged and X would have got just 10000 and he would have paid it to Y as it is. then why X should do this business?? you only answer keeping in view if there would not have been any tax on such services.
Nitin
(CA)
(22 Points)
Replied 13 June 2009
Do the totalling and differnce it by surplus or deficit. Prepare a Statement of Affairs in a "T" shape formatt taking all assets to Right hand side of the formatt and all liabilities to left hand side of the same "T" shape format.
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