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Service tax with vat

suresh (accountant) (34 Points)

17 February 2015

hi sirs,

Please explain the following …

Basic Value	100,000
VAT 70% of Basic value Rs: 70,000/- @ 14.5%	10,150
Service Tax 70% of Basic value Rs:70,000/- @ 12.36% Rs:8,652/-and Share 35%Party & 35%Bill Receiver.
for this Rs:8,652 @ 50% (Input Service Tax)	4,326
Total Bill Value Rs:	114,476

based on above transction not matched 100% it comes 105%.. Is correct means how to made entry & please update related amendment.

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6 Replies

Aditya RVS (Practice) (221 Points)
Replied 17 February 2015

Dear Suresh,

Please clarify with regard to 105%. I could not understand your query.

suresh (accountant) (34 Points)
Replied 17 February 2015

thanks for your action, like VAT 70% and Service Tax 35%. = 105%

Vikas (CA) (1135 Points)
Replied 17 February 2015

The aforesaid calculation seems correct from Service tax perspective.

The vendor seems to have considered 70% of the net amount (may differ from State to State) as value of goods. Thus, charged VAT on 70% value.

Further, under Service Tax Law, it seems that the contract is considered as works contract. It further seems that the vendor is a non-body corporate i.e., individual, firm, etc. and you are a body corporate. Thus, the vendor would charge Service tax @ 12.36% on 70% of the value, 50% of which is payable by you.

Please refer to the following calculation –

Sr. No.	Particulars	Amount (Rs.)
I	Net Invoice Value	100,000
II = I x 14.5%	VAT @ 14.5% x 70%	10,150
III = I x 70% x 12.36%	Service tax @ 8.652% (i.e., 12.36% on 70% value)	8,652

	Note : Please note that if service provider is a non-body corporate i.e., Individual, HUF, Firms, etc. and service recipient is a body corporate, then 50% of the Service tax is required to be paid by the service recipient under reverse charge mechanism.

IV = III x 50%	Service tax payable by service provider	4,326

V = I + II + IV	Total amount charged in the invoice	114,476

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Aditya RVS (Practice) (221 Points)
Replied 17 February 2015

Dear Suresh,

The percentages of 70% for VAT and 70% for Service Tax are fixed to ascertain the component of Service and Supply in the transaction and as such, we cannot derive the converse by stating that the base value is increased to that extent. If that would be the case, as you said, the base should be 70+70 = 140.

But that is not what is intended. It only means that for the purpose of VAT, 70% of the value represents supply and for the purpose of Service Tax, 70% of the value represents service. These provisions are framed considering that the assessee is unable to ascertain the individual components of supply and service and thus, composition scheme is chosen. If the assessee is able to separate them, then this method is not applicable.

Entries for the same would be as follows:

Descripttion Amount Rs. Amount Rs.

Debit Expense A/c (Value of Service) 100,000

Debit Expense (VAT Portion - Input Credit 10,150

is not available in composition)

Debit Service Tax Input Credit account (Total

Service Tax) 8,652

Credit Supplier/Service provider 1,14,476

Credit Service Tax payable A/c (Reverse charge) 4,326

Please refer to Notification No. 24/2012 - ST and 30/2012 - ST, for information on the amendment.

suresh (accountant) (34 Points)
Replied 18 February 2015

Dear sirs.. thanks for your attention.. how can made entry in Tally.. details given below.

	Basic Value Rs	823,315
70%of Basic Value Rs:576,321/-.	VAT 14.5%	83,566
35%of Basic Value Rs:288,160/-.	ST 12.36%	35,616
	Transport	5,000
		947,497

	DR	CR
Total Bill Rs		947,498
VAT Basic Value 70%	576,321
Input Tax 14.5%	83,566
ST Basic Value 35%	288,160
Input ST 12.36%	35,617
Freight	5,000
	988,664	947,498

not tally above entry... so please tell me again...

Vikas (CA) (1135 Points)
Replied 18 February 2015

My friend,

The difference is because you are artificially breaking one transaction into two. Pass consolidated entry, wherein the net value would remain the same i.e., 823315, create a new VAT head namely, VAT @ 14.5% on 70% - add 83,566/- to it and create a new Service tax head namely, Service tax @ 8.652% on 50%- add Rs.35,617/- and at the end charge Rs.5000 to transportation.

This is the only way to pass the entry. If you break Rs.823315 artificially into 70% and 35%, then there would always be an excess of 5%, (i.e., 41167, exactly the same difference in your table) which is incorrect.

I hope this clarifies the doubt.