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Service tax problem

Shivani (Learner) (1881 Points)

09 October 2014

Dear Friends

I have the following query relating to service tax in Tally

Suppose ABC Pvt. Ltd. made a sale of taxable services worth Rs. 100000 to Mr. A.

Now we know that we pass the entry in the sales voucher in Tally in Accounting Invoice Mode and charge service tax and cesses.

But if you go to Gateway of Tally > Display > Statutory Reports > Service Tax Reports > Service Tax Payables > Bill Date Wise

You will find there that in the Realised Amount Column, Tally is showing Rs. 112360 !!!

How come tally is showing Rs. 112360 in Realised Amount Column?

Realised amount means the amount which the service provider has received from service receiver, but in this case we have thus far passed only the sales entry and the receipt entry is yet to be passed.

Please advise soon.

regards

shivani

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13 Replies

Eswar Reddy S (CFO- at NHTF) (58270 Points)
Replied 10 October 2014

Hello Madam , Realisable amount means service + tax if any receivable from service receiver. Go to gate of tally------Profit and loss account, see the income side you will get only Rs.100,000/-

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Eswar Reddy S (CFO- at NHTF) (58270 Points)
Replied 10 October 2014

As the service tax is a balnce sheet item 12.36% on 100,0000=12360/- it will not add to income in profit and loss account.You need to collect the same from the service receiver.So realisable value will be 100000+St 12360 total 112360/-

Eswar Reddy S (CFO- at NHTF) (58270 Points)
Replied 10 October 2014

Even purchase and sales register also it will show after vat full amount.

Eswar Reddy S (CFO- at NHTF) (58270 Points)
Replied 10 October 2014

P&L and Balance sheet you need to verify.Remaining are intermediary reports.

Shivani (Learner) (1881 Points)
Replied 10 October 2014

Dear Eswar

I understand all what you said but i am not asking about Realisable Value, I am asking about Realised Amount.

Realised Amount is what you received from Service Receiver.

Since in this case we have not yet received anything from Service Receiver and receipt entry has not been thus so far passed in books, then why tally show Rs. 112360 as Realised Amount.

please advise

regards

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Eswar Reddy S (CFO- at NHTF) (58270 Points)
Replied 10 October 2014

Dear Shivani, I understood.It shows realised --but if you go to ledger account of 'A ' ,you will se still outstanding of Rs.112360/- against the particular Invoice.

Mihir (Wealth Manager) (5293 Points)
Replied 10 October 2014

You are not looking at debtor's statement. It is service tax report, in which you have received the service tax as shown in the realised amount column, even if you are yet to receive the amount from the debtor. It is only a service tax report, and nothing to do with the debtor. If you go through the service tax law, there are elements of taxation such as 1) when you began giving service 2) when service was completed 3) when you booked the service to be provided 4) when you received the advance toward service. So when you book the entry, you have received the service tax from the debtor, which you are required to deposit in the Govt treasury within a stipulated period, which is why, bill-date-wise details of service tax payable is given.

Shivani (Learner) (1881 Points)
Replied 10 October 2014

Dear Friends

I understand that in the ledger it still shows Rs. 112360 as due from service receiver.

I have no problem with that.

My problem is with teh service tax report. Why in service tax report it is showin any amount in the Realised Amount when we have not yet received anything from service receiver.

As far as Point of Taxation Rules, we are a Privat Limited Company so Service Tax liability arises to us on accrual basis.

We have just raised invoice within 30 days of completion of service. No payment has been received thus far from the service receiver.

So Point of Taxation is on the date of issue of invoice.

We pass the entry in tally but why is Tally showing that we have received amount in Reaalised Amount Column when in fact we havent received anything from Service Receiver.

If you try the purchase of services entry, Tally doesnt show anything in the Paid Amount Column till we pass the payment entry.

After you pass the payment entry, it shows the amount in the Paid Amoutn Column, which is the right thing.

But then why is Tally not doing so in case of Sale of Services.

Accrual concept means acknowledging revenue when it is earned and we are doing that by crediting sale of services and debiting service receiver.

Accrual concept does not mean that we should ALSO acknowledge the receipt when there has been none.

So friends ?? !!!

Any reasons why Tally is doing so ??????

Regards

Mihir (Wealth Manager) (5293 Points)
Replied 10 October 2014

Given below a very simple example.

ABC gave services of some sort to XYZ. ABC will book the entry in tally showing the charges/fees + the service tax to be received from XYZ. ABC does not know for sure when XYZ will pay up. But ABC is required to deposit service tax to govt within a specified period regardless of XYZ paying up in time or not. So it has been assumed that when ABC books the entry in tally, ABC is liable to deposit service tax to govt even if ABC has not received any money from XYZ. Which is why tally shows realised amount or amount that ABC is liable to pay as service tax to govt. Now if XYZ pays up after one year from booking the entry in tally in ABC books, ABC cannot delay depositing the service tax to govt up to one year, can they? ABC will have to not only follow-up with XYZ to realise the payment but also to manage cashflow just in case XYZ does not pay before due date of depositing service tax. Service tax is a liability for ABC even if XYZ pays in time, or does not pay at all.

Any doubts?

sunil (ca final student) (41 Points)
Replied 10 October 2014

U r using option alt+f8 in ledger then found taxable amount and service tax amount saprately...

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Shivani (Learner) (1881 Points)
Replied 11 October 2014

Dear Mihir

So basically you are saying is that i should look at the Service Tax Report from the Service Tax Department view point.

Though i have not yet realised the amount from teh service receiver, I should look the service tax report from teh department viewpoint.

In tally I am preparing my books of accounts and if i want to know how much taxable value of services i have realised from teh service receivers, I need to go to this report but this report will not give me a true picture at all.

I understand your logic and agree that the service tax liabiity is of service provider no matter whether he collects service tax from service receiver or not.

But to look service tax reports from department's angle ???

If i am preparing my books in tally, then the reports should give a picutre of my state of affairs only.

Regards

Shivani (Learner) (1881 Points)
Replied 11 October 2014

Dear Sunil

I couldn't understand what you are trying to say.

Regards

Mihir (Wealth Manager) (5293 Points)
Replied 11 October 2014

Dear Shivaniji, Is it not important for you to know what your tax liabilities are? If you provide services, complete the job and raise the bill, service tax liability will arouse, which you will have to account for in your cashflow.

I have seen people charging service tax into their bills and not depositing the same into Govt treasury for months. They want to use this service tax funds as working capital instead of paying interest on OD facility of bank. This is of course a violation of service tax rules.

So when service tax liability arises as per service tax rules or dept views, it is also your view to know your liability and accordingly adjust your cashflow.

You raise invoice for a debtor but income tax will have to be paid before filing ITR even if the debtor has not paid yet.

People are very smart. If they are allowed to wait for the debtor to pay up before depositing tax, then they will take cash from the debtor and write off the amount in books, and not pay tax.