service tax on lawyers

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rahul murarka (Querist)
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30 July 2010 Ours is a law firm and we make payment of service tax on the basis of amount collected from the clients. Now my query is that whether we have to make entry in service tax payable a/c only of the amount received from the clients or for every bills raised on the clients resulting in credit balance shown in service tax payable a/c.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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30 July 2010 It depends on the method of accounting followed by the law firm. If they follow cash system of accounting, only receipt based accounting is needed. On the other hand, if following mercantile system, bill wise accounting is necessary meaning there by that service tax account will show a credit balance in the books of accounts with respect to the uncollected bills.

N.B : - Only law firms, which are business entities under the Indian Partnership Act,1931 or the Limited Liability Partnership Act, will be have to pay service tax on fees charged from corporates.
This (service tax) will not be applicable in case the service provider or the service receiver is an individual.

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