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Urg -journal entry for service tax reverse charge mechanism

VIJAY G (Assistant Manager -Accounts) (53 Points)

08 October 2015

Plz can anyone clarify me the doubt of Service tax reverse charge mecahnism payment . Mine is a company registered

For Example : if my Security agency has given me a bill to me for Rs.10,000/- p.month

1.what will be the Journal entry i need to book for the expenses and payment with amount ?

2. Tell me the service tax liability entry need to be posted and remit to Govt ?

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5 Replies

Shubham Bansal (Student CA) (62 Points)
Replied 08 October 2015

For booking of expense:

Security expense Dr. 10,000

Service Tax Credit Dr. 1,400

To Security Agency 10,000

To Reverse charge payable 1,400

For payment of tax:

Reverse charge payable Dr. 1,400

To Bank 1,400

1 Like

Piyush Tanwar (Assistant Manager - Accounts) (1432 Points)
Replied 08 October 2015

For Booking of expenses:- (Assuming inclusive of service tax)

Security Expenses A/c - Dr 10000

To Security Agency or Bank A/c 8772

To Service Tax Pybl on Reverse Charge - Manpower 1228

Credit of service tax paid on reverse charge can be availed only in the month following the month of payment of tax

1 Like

sajjad hossain (CONSULTANT) (50 Points)
Replied 08 October 2015

Your company is registered company.Now you will have to see wheather the agency is Indivdual/HUF/Partnership OR a registered pvt ltd co.If it is not a registered company

no reverse mechanism is applicable in your case.You will have to deposit all the service

Tax (100%) on your own.If the Agency is a limited co.then pay the service tax to the agency and the agency will deposit the tax on your behalf.

and the journal is ( If ST is paid to Agency )

Watch and Ward Exp Dr 8772

Service Tax Input Dr 1228

To Security Agency 100000

Hari Venkata Ramana (General Manager Accounts) (26 Points)
Replied 08 October 2015

Further to the above threshold limit is not applicable in case of reverse charge. Even if the gross value of security agency is below threshold limit the service receiver is supposed to discharge the service tax liability under RCM

(Guest)

IN CASE OF A COMPANY(PROVIDER)
	VENDOR AC	CR	9800
	TDS PAYABLE	CR	200
	SECURITY SERVICES	DR	10000


IN CASE OF OTHERS(PROVIDER)
	SECURITY EXPS A/C	DR	10000
	SERVICE TAX EXPS A/C	DR	1400
	SERVICE TAX LIABILITY A/C	CR	1400
	TDS ON CONTRACTORS	CR	200
	VENDOR A/C	CR	9800


PAYMENT
	SERVICE TAX LIABILITY A/C	DR	1400
	BANK ACCOUNT	CR	1400