Accounting of service tax

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CA-ASPIRANT (Querist)
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08 May 2009 As we know service tax is paid only when consideration for service is received. if no consideration is received no service tax liability arises.

At the time of billing we credit service tax account and provide service tax liability in the books of account whereas there is no service tax liability arises at the time of billing.

Please suggest proper accouting treatment of service tax so that liability can be created in the books of account only when it actually arises.

C.A.Javid Patel

C.A.Javid Patel (Expert)
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08 May 2009 1.on bill booking

Debtor A/c Dr
To sales
To Service Tax Payable

2. on receipt from debtor
Serice tax payable a/c Dr
To service tax due a/c

3.on payment of service tax
service tax due a/c dr
To bank

CA-ASPIRANT

CA-ASPIRANT (Querist)
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08 May 2009 on bill booking
we are crediting service tax payable account in the books of account i.e we are creating liability but actually there is not liability.

if service tax payable accout is showing credit balance as on balance sheet, how should it be disclosed in the finacial statement at the balance sheet date.

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