Treatment of service tax charge on prepaid mobile recharge
This query is : Resolved
Tarun kumar
(Querist)
24 November 2014
Treatment on the hand of company, if XYZ telecom company is charging service tax on prepaid mobile coupon..is there any service tax liability on XYZ telecom company? If yes then plz share related to payment/ return/ non-compliance then what will the amount of interest & penalty?
Amol S Joglekar
(Expert)
24 November 2014
If service tax is charged separately in the invoice/bill, then the same has to remitted to Govt account, after deducting input credit, if any.
Tarun kumar
(Querist)
25 November 2014
My question is abt...Suppose if we do recharge of Rs.100 in which we will get balance of Rs.86, processing fees Rs3 & Service tax Rs11.....now my question is what is tax treatment of Rs.11 on the hand of telecom companies....?
Amol S Joglekar
(Expert)
25 November 2014
service tax collected a/c is credited with that amount (11)
Tarun kumar
(Querist)
25 November 2014
Upto which date....if such amount is not deposited in service tax collected a/c...what would be the rate of interest & penalty??
Tarun kumar
(Querist)
25 November 2014
How to check whether service tax charged from the customer is 100% credited into service tax collected account?
02 August 2025
Here's the detailed treatment and compliance points regarding **service tax charged on prepaid mobile recharge** on the telecom company's side:
---
### 1. **Service Tax Liability on Telecom Company (XYZ Telecom)**
* When the telecom company charges **service tax separately** on prepaid mobile recharge (e.g., Rs. 11 on recharge), **it is liable to pay that amount to the government**.
* This amount is **not the telecom company’s income**; it is collected on behalf of the government.
* **The telecom company must deposit the service tax collected to the government’s account** within the prescribed time.
---
### 2. **Accounting Treatment**
* On receipt of recharge amount (Rs. 100) comprising:
* Customer balance credited: Rs. 86
* Processing fees: Rs. 3
* Service tax charged: Rs. 11
**Journal entry when recharge is sold:**
```
Bank / Cash A/c Dr. 100
To Customer Account (Liability for recharge balance) 86
To Processing Fees Income 3
To Service Tax Payable (Liability) 11
```
* **Service tax collected account is credited by Rs. 11**, representing liability to government.
---
### 3. **Payment / Return Filing**
* The telecom company is required to **deposit the service tax collected to the government within due dates** (usually by 6th of next month).
* They also need to **file monthly or quarterly service tax returns** declaring the service tax collected and paid.
* Any **input tax credit** (if applicable) can be adjusted before payment.
---
### 4. **Non-compliance Consequences: Interest & Penalty**
* If service tax collected is **not deposited on time**, interest and penalties apply:
**Interest:**
* Charged @ **18% per annum** on the delayed amount from due date till the date of payment.
**Penalty:**
* Can be levied under various provisions; generally, it can be up to the amount of service tax not paid.
* If delay is due to **willful evasion**, penalty can be more severe (e.g., equivalent to amount not paid, or imprisonment in extreme cases).
---
### 5. **Checking Whether Service Tax Collected is Deposited**
* The telecom company can verify payment through:
* **Service tax challan details** (CENVAT portal or bank challans).
* Their **accounting system and reconciliation** of service tax collected vs deposited.
* Returns filed with the department should match the payment.
* Discrepancies must be reconciled immediately to avoid penalties.
---
### Summary:
| Aspect | Treatment |
| ------------------------------- | ------------------------------------ |
| Service tax charged to customer | Liability of telecom company |
| Deposit to govt | Must deposit full amount on time |
| Interest on delay | 18% p.a. on delayed payment |
| Penalty on non-payment | Up to amount of tax, more if willful |
| Accounting | Credit service tax collected account |
---
If you want, I can help you with a **sample service tax return format** or **detailed journal entries** for various scenarios. Let me know!
---
### 1. **Service Tax Liability on Telecom Company (XYZ Telecom)**
* When the telecom company charges **service tax separately** on prepaid mobile recharge (e.g., Rs. 11 on recharge), **it is liable to pay that amount to the government**.
* This amount is **not the telecom company’s income**; it is collected on behalf of the government.
* **The telecom company must deposit the service tax collected to the government’s account** within the prescribed time.
---
### 2. **Accounting Treatment**
* On receipt of recharge amount (Rs. 100) comprising:
* Customer balance credited: Rs. 86
* Processing fees: Rs. 3
* Service tax charged: Rs. 11
**Journal entry when recharge is sold:**
```
Bank / Cash A/c Dr. 100
To Customer Account (Liability for recharge balance) 86
To Processing Fees Income 3
To Service Tax Payable (Liability) 11
```
* **Service tax collected account is credited by Rs. 11**, representing liability to government.
---
### 3. **Payment / Return Filing**
* The telecom company is required to **deposit the service tax collected to the government within due dates** (usually by 6th of next month).
* They also need to **file monthly or quarterly service tax returns** declaring the service tax collected and paid.
* Any **input tax credit** (if applicable) can be adjusted before payment.
---
### 4. **Non-compliance Consequences: Interest & Penalty**
* If service tax collected is **not deposited on time**, interest and penalties apply:
**Interest:**
* Charged @ **18% per annum** on the delayed amount from due date till the date of payment.
**Penalty:**
* Can be levied under various provisions; generally, it can be up to the amount of service tax not paid.
* If delay is due to **willful evasion**, penalty can be more severe (e.g., equivalent to amount not paid, or imprisonment in extreme cases).
---
### 5. **Checking Whether Service Tax Collected is Deposited**
* The telecom company can verify payment through:
* **Service tax challan details** (CENVAT portal or bank challans).
* Their **accounting system and reconciliation** of service tax collected vs deposited.
* Returns filed with the department should match the payment.
* Discrepancies must be reconciled immediately to avoid penalties.
---
### Summary:
| Aspect | Treatment |
| ------------------------------- | ------------------------------------ |
| Service tax charged to customer | Liability of telecom company |
| Deposit to govt | Must deposit full amount on time |
| Interest on delay | 18% p.a. on delayed payment |
| Penalty on non-payment | Up to amount of tax, more if willful |
| Accounting | Credit service tax collected account |
---
If you want, I can help you with a **sample service tax return format** or **detailed journal entries** for various scenarios. Let me know!
Amol S Joglekar
(Expert)
25 February 2026
Thank you very much for the enlighting
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