Accounting entry in service tax

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

26 May 2015 How to pass a Accounting Entry under Reverse charge mechanism of service Tax. For eg.: if a Service Tax Provider Bill is of Rs.92474/- and Service Tax calculated @ 12.36% on above Rs.11,430/-. How one should calculate the reverse Service tax application and the TDS deducted on the same. How the same has to be shown as accounting entry, Please provide the right method of accounting. Thanks.

CA Suhas Prabhu

CA Suhas Prabhu (Expert)
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26 May 2015 The Reverse Charge Mechanism is calculated as total service tax payable less abatement if any.

Assuming the service receiver has to pay 100% Service Tax (Legal) (in the books of Service recipient)

Accounting Entry would be

Legal Service A/c - - - Dr 92,474
To TDS payable A/c - - - - - 9,248
To Service provider - - - - 83,226
(Being legal invoice accounted)

Service Tax Payable A/c ----Dr 11,430
To Bank 11,430
(Being Service Tax under RCM paid)

CENVAT Credit Availed A/c - Dr 11,430
To Service Tax Payable 11,430
(Being CENVAT credit taken)

Please note that Service Tax can be claimed under RCM only after payment of Service Tax.