Reverse charges in service tax
Querist : Anonymous
suppose i am partner in producion house (movies). We are getting sponsership services from one business man for the production of movie. my queries are:-
1.how much amount we can take from him without applicability of service tax ?
2. if service tax is applicable then what will be its whole impact ?
3. who is to pay and how much ?
4. what's the accounting entries in this case ?
5. also explain reverse charges in service tax ?
6. what will be the agreement made between partners and sponsers and also let me know while preparing partnership deed is it necessary to show that we will take sponsership services ?
Whether It is Corporate or Non Corporate.
So In This Case, There is No Limit Since Reverse Charge is Applicable, Even a Single Rupee Will be Chargeable for Service Tax.
https://www.caclubindia.com/experts/reverse-charges-in-service-tax-1129594.asp
Querist : Anonymous
In case of sponsorship entire service tax to be paid by serve recipient...Outflow would be 12.36% of the sponsorship amount was there prior to 01.07.12 also.
Expense head to be booked.
Querist : Anonymous
IF WE RAISE BILL THEN WHAT WILL BE THE ACCOUNTING ENTRY AND IS IT NECESSARY TO SHOW WHILE PREPARING PARTNERSHIP DEED THAT WE ARE TAKING SPONSERSHIP IN FORM OF MONEY ???
Relevent expense head need to be used i.e. sponsorship.
No specific need to mention in deed...
Querist : Anonymous
Querist : Anonymous
Querist : Anonymous
1. Who raises the bill and what should it include?
The sponsor (service provider) raises the bill only for the sponsorship amount, without service tax (because under RCM, tax is paid by the recipient).
The bill should clearly state something like:
“Service tax is payable by the service recipient under Reverse Charge Mechanism as per Notification No. XX/XXXX.”
2. Is the sponsorship amount income or expense for you?
Money received as sponsorship is your income.
The service received (sponsorship service) attracts service tax, which you (recipient) must pay directly to the government under RCM.
So, you will show sponsorship amount as income, and separately record service tax liability on that sponsorship amount as an expense (service tax payable under RCM).
3. Who pays service tax and how much?
The service recipient (you) is liable to pay service tax under reverse charge.
Service tax rate (as on your date) was 12.36% (including cess).
Tax payable = Sponsorship amount × Service tax rate.
The sponsor does not charge or collect service tax.
4. Accounting entries in your books
When you receive sponsorship and pay service tax under RCM:
Transaction Debit (Dr) Credit (Cr)
Sponsorship amount received Bank/ Cash Sponsorship Income
Service tax liability on sponsorship Service Tax Expense (or Input Tax Credit if eligible) Service Tax Payable (to Govt)
Payment of service tax to Govt Service Tax Payable Bank/ Cash
If you pay service tax under RCM and are eligible for credit:
You can adjust the tax paid as Input Credit.
5. Is it necessary to mention sponsorship services in partnership deed?
No, there is no legal requirement to specifically mention sponsorship services in the partnership deed.
Partnership deed generally covers business scope broadly.
Sponsorship receipts and related service tax treatment is an accounting and tax matter.
6. Summary of Reverse Charge on Sponsorship:
Aspect Explanation
Bill raised by Sponsor (without service tax)
Who pays service tax Recipient (you) under Reverse Charge
Service tax rate 12.36% (including cess)
Accounting treatment Sponsorship as income; service tax as expense/liability
Partnership deed mention Not mandatory
Sample Bill Format from Sponsor:
yaml
Copy
Edit
Invoice No: 001
Date: DD/MM/YYYY
Bill To: [Recipient Name]
Description: Sponsorship for movie production
Amount: Rs. 100,000
Service Tax: Not applicable (payable by recipient under Reverse Charge Mechanism as per Notification No. XX/XXXX)
Total Amount Payable: Rs. 100,000
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