accounting entry fof service tax and excise

Dear Friends

Output  Excise duty = Excise duty charged on Sales ( Collected by us from our customers on Sales)

Input Excise Duty = Excise duty charged on Purchases ( Paid by us to the vendor on purchases )

We need to setoff “Input Duty “ from “Output Duty”, and balance should be credited into the account of Government.

The Nature of Excise Duty is a LIABILITY.

Accounting Entry – Output Excise Duty

Cash / Bank / Customer A/c                                      Dr

            To Sales A/c

            To Excise Duty (Output)

            To Education Cess @ 2% on Excise Duty

            To SHE Cess @ 1% on Excise Duty           

Accounting Entry – Input  Excise Duty

Purchases A/c                                                 Dr

Excise Duty ( Input)                                                   Dr

Education Cess @ 2% on Excise Duty                    Dr

SHE Cess @ 1% on Excise Duty                             Dr.

            To Cash  / Bank / Vendor A/c

Please note following points:-

This is neither  an integral element of  “Sales” nor “Purchases”.

SERVICE TAX

Service Tax is to be understood on similar lines, cited above.  Service Tax is a liability.

Both (1) Excise duty and (2) Service Tax known as INDIRECT TAXES, which you all are aware.

From : Venkateswara Rao Sapare

superb venkat 

i like your step by step way of explanation.

keep it up.

Purchase A/c  Dr

Service Tax Recoverable Dr[CA]

To Cash/Vendor A/c

Cash/Vendor Dr

To Sales A/c

To Service Tax Payable[CL]

plz correct me if it is wrong

Can you please let me know how do we account the service tax of insurance agents, since the service tax of insurance agents are paid by insurance provider. Also while raising the invoice for the Commission, should the service tax component should be shown seperately.

Please clarify.

IF AN ASSESSE IS REGISTERED AND IS HAVING A SERVICE TAX PROVIDER NO. THEN IN THIS SCENARIO THE JOURNAL ENTRY WILL BE

1. IF SERVICES ARE RENDERED BY THE PAYEE THEN       

                        SERVICES RECIEVED  A/C  DR.                                

                            SERVICE TAX @ 10.3%     DR.

                                  TO PAYEE A/C