journal entry of service tax passed

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Querist : Anonymous

Querist : Anonymous (Querist)

06 February 2010 sir,
Can you please tell me what is the journal entry of service tax passed when the bill is issued to the Service receiver ?

is the following entry is correct at the time of raising bill

Debtors a/c dr
TO Income a/c
TO service tax payable a/c
TO edu cess payable a/c
TO she cess payable a/c

is it correct

Rahul Gupta

Rahul Gupta (Expert)
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06 February 2010 The entry provided is correct from exam point of view and gives the same net result as mine.
However based on my Experience, Practically I suggest the following entry can be made in order to have a difference between the service liability for the month which arise on the receipt of the amount from the service receiver and the service tax amount for which the receipts have not received till date.
The logic for this is that in Service the liability to pay service tax arise on the receipt of payment from the service receiver. Also, it benefits in making reconciliations of service tax liability during audits.

Debtor Dr
Service Income Cr
Service Tax Suspense Cr
Edu Cess Suspense Cr
H Edu Cess Suspense Cr

When we receive money from the debtor we will pass two entries:

Bank Dr
Debtor Cr

Service Tax Suspense Dr
Edu Cess Suspense Dr
H Edu Cess Suspense Dr
Service Tax Payable Cr
Edu Cess Payable Cr
H Edu Cess Payable Cr

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