service tax for credit card exps
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
06 June 2010
A director of a ompany uses credit card for official purpose also and pvt. ltd company makes payment every month. Should the service tax charges charged in the statement by the credit card bank be debited to drawings of the director or to the company. The expenses are mostly for official purpose. Kindly guide.
07 June 2010
First of all the term drawing is used in propritor ship or partnership firm only. In case of company or other entity there cannot be word drawings.
Coming to u r question directly;
If credit card is provided by company to its director only for official use, than service tax paid will be inclusive part of expenses and company may bear the same and will be allowed as deduction, whereas director uses its personal credit card for official as well as for personal use than company may bear the service tax element to the extent apportioned to official expenses.
Coming to u r question directly;
If credit card is provided by company to its director only for official use, than service tax paid will be inclusive part of expenses and company may bear the same and will be allowed as deduction, whereas director uses its personal credit card for official as well as for personal use than company may bear the service tax element to the extent apportioned to official expenses.
Querist : Anonymous
Querist :
Anonymous
(Querist)
07 June 2010
Can we deduct the personal exps. as advance paid, from the salary of director,being paid monthly
24 July 2025
Here's a clear explanation based on your query about **service tax on credit card expenses** and the accounting treatment in a company:
---
### 1. **Service Tax on Credit Card Charges**
* The **service tax charged by the credit card bank** (like service charges, processing fees) is part of the cost of using the credit card service.
* When a **company pays the credit card bill on behalf of the director** for **official expenses**, the entire amount including service tax is an expense for the company.
* If the director uses the **personal credit card partly for official and partly for personal use**, then the company should only reimburse or bear the service tax cost related to the **official portion** of the expenses.
---
### 2. **Accounting Treatment: Drawings vs. Company Expenses**
* The term **"drawings"** applies only to **proprietorships or partnership firms**, **NOT companies** (including Pvt. Ltd companies).
* In a **company**, amounts paid for directors' personal expenses should **not be treated as drawings**.
* **If the company pays the full credit card bill (including personal expenses), the personal portion should be recovered from the director** through:
* Deducting it from the director’s salary, or
* Treating it as a **loan/advance from the director** to the company.
---
### 3. **Deducting Personal Expenses from Director’s Salary**
* Yes, the company **can deduct the personal expenses portion from the director’s salary as an advance or adjustment**.
* This should be properly documented and accounted for to maintain clear records.
* Ideally, the director should submit statements showing which expenses are official and which are personal to enable accurate apportionment.
---
### **Summary**
| Scenario | Accounting Treatment |
| --------------------------------------------------------- | ------------------------------------------------------------------------------------- |
| Credit card issued by company for director's official use | Service tax charges treated as company expense |
| Director uses personal credit card for mixed purposes | Company bears official expense portion only; personal portion recovered from director |
| Deducting personal expenses from salary | Allowed, as adjustment against salary payable |
---
If you want, I can help draft journal entries or policies for handling this situation in your company books. Would you like that?
---
### 1. **Service Tax on Credit Card Charges**
* The **service tax charged by the credit card bank** (like service charges, processing fees) is part of the cost of using the credit card service.
* When a **company pays the credit card bill on behalf of the director** for **official expenses**, the entire amount including service tax is an expense for the company.
* If the director uses the **personal credit card partly for official and partly for personal use**, then the company should only reimburse or bear the service tax cost related to the **official portion** of the expenses.
---
### 2. **Accounting Treatment: Drawings vs. Company Expenses**
* The term **"drawings"** applies only to **proprietorships or partnership firms**, **NOT companies** (including Pvt. Ltd companies).
* In a **company**, amounts paid for directors' personal expenses should **not be treated as drawings**.
* **If the company pays the full credit card bill (including personal expenses), the personal portion should be recovered from the director** through:
* Deducting it from the director’s salary, or
* Treating it as a **loan/advance from the director** to the company.
---
### 3. **Deducting Personal Expenses from Director’s Salary**
* Yes, the company **can deduct the personal expenses portion from the director’s salary as an advance or adjustment**.
* This should be properly documented and accounted for to maintain clear records.
* Ideally, the director should submit statements showing which expenses are official and which are personal to enable accurate apportionment.
---
### **Summary**
| Scenario | Accounting Treatment |
| --------------------------------------------------------- | ------------------------------------------------------------------------------------- |
| Credit card issued by company for director's official use | Service tax charges treated as company expense |
| Director uses personal credit card for mixed purposes | Company bears official expense portion only; personal portion recovered from director |
| Deducting personal expenses from salary | Allowed, as adjustment against salary payable |
---
If you want, I can help draft journal entries or policies for handling this situation in your company books. Would you like that?
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