27 March 2009
please explain me about the types of accounts to be maintain in case of service tax and service tax inword credit and how entries to be passed in this accounts,please solve this query
27 March 2009
Service tax Credit is received once you pay for services, Hence if you need to create three account. 1. Service Tax Payble Account-Current Liability 2. Service Tax Credit-Receivable-Current Asset 3.Service Tax Credit-Received-Current Asset.
So when u book entry, then first transfer the Credit to receivable account & once final payment is made against this serives bill then shift the entry from receivable to received, this is beacause service tax credit is reeived only on payment basis. & not on accrued basis.
27 March 2009
The Payment of Service Tax to the Central Govt. is based on the collection of the same from the debtors.Further the Input Credit is also based on the actual Payment Basis.Therefore,the entries should be made in such a that both accrual & actual position could be known. Accordingly in my opinion following Entries is required to be Passed for accounting the service Tax .
1.At the time of the Raising of the Invoice :
Debtors Account Dr.....xxxx
To Income Account xxxx
To Service Tax - Output Account xxxx (Being Invoice Raised on the debtor)
2.At the Time of actual receipt of full or part receivable from the Debtor.
Bank Account Dr.....XXXX TDS Account Dr.....XXXX Service Tax -Output Acc Dr.....XXXX
To Debtors Account xxxxx To Service Tax Payable A/c xxxxx
(Being Collection from the Debtor)
3.At the time of receiving the invoice from the Vendor :
Expenses Account Dr.....xxxx Service Tax - Input A/c Dr.....xxxx
To Vendors Account xxxxx
4.At the time of making actual or Partial Payment to the Vendor.
Vendor Account Dr....xxxx Service Tax Payable A/c Dr....xxxx To TDS Account xxxx To Service TAX - Input Account xxxx To Bank Account xxxx (Being Payment made to the Vendor)
At this Point of time the Service Tax Payable Account Shows the actual amount Payable to Central Govt after set off of Input Service Tax.
The Service Tax Output Account & Service TAX input Account will have balance as per the receipt from the debtor & payment to creditors.
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