Booking of service tax paid as an expence

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This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

09 April 2016 Dear all,we are a manufacturing concern and don't have ST registration.Though we have several service bills to pay(including RCM cases) per month.

Since we are not registered,we can not take credit of ST paid.some accountants suggest us to show the tax paid as your expences by adding them with related expenses head instead of debiting them as our input.Is the practice correct ?

1) If yes.Please suggest the entry.
2) If no.Please suggest the appropriate treatment of tax paid.

Thanks in advance.

CA.Sourabh Sethia

CA.Sourabh Sethia (Expert)

10 April 2016 Credit can be utilized only if it is covered by definition of Input Service, if it is not then no credit is available then you have to book it as expense.

For RCM you need to take ST Registration (compulsory) as you need to pay ST there is no exemption even if you do not take credit. For credit of RCM services also above is applicable i.e. if it is INPUT.

Entry is same as you pass it for a normal expenses

i.e suppose you pay Rs.2100 for Printing & Stationery
you pass
Printing & Stationery Dr 2100
To Bank/Cash 2100

likewise Expense paid Rs.4000 (including ST of Rs.219/-) then entry would be
Expenses Dr 4000
To Bank/Cash 4000

Message likes : 1 times

Querist : Anonymous

Querist : Anonymous (Querist)

11 April 2016 Thank you very much sir !!

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