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Accounting entry for reverse charge mechanism ( rcm) in st

gupta (Accountant) (305 Points)

27 November 2015

Dear All

Can you give an idea what will be the entries in Tally in case of RCM of the following case :-

We got Security Service charges bill for Rs.10000/- and they have not charged any ST in their bill.Now we have to deposit ST on their behalf.

Please mention the entries step by step.

Thanks in advance

.Regards

Jayanta

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12 Replies

CA jignesh daiya (CA ) (446 Points)
Replied 27 November 2015

TAXATION POINT:-

SECURITY SERVICE CHARGE IS COVER BY 100% REVERCE CHARGE HENCE IN THIS CASE SERVICE RECEIVER IS LIABLE TO PAY SERVICE TAX

AS PER RULE 7 OF POINT OF TAXATION IN THIS CASE IS DATE OF PAYEMENT IF PAYEMENT MADE WITHIN 3 MONTH OF INVOICE DATE ELSE NEXT DAY AFTER COMPLETION OF 3 MONTH

AS PER CENVAT PROVISON, SERVICE RECIVER IS ELIGIBLE TO TAKE CENVAT CREDIT ON TIME OF APYEMENT OF SERVICE TAX IRRESPECTIVE OF PAYEMENT TO SERVICE PROVIDER

ACCOUNTING ENTRY

AT THE TIME OF RECEIPT OF INVOICE

SECURITY SERVICE A/C ......DR

TO SERVICE PROVIDER A/C

TO SERVICE TAX PAYABLE A/C

AT THE TIME OF PAYEMENT TO SERVICE PROVIDER IF WITHIN 3 MONTH OF INVOICE

SERVICE PROVIDER A/C ;;;DR

TO BANK A/C

AT THE TIME OF MAKING PAYEMENT OF SERVICE TAX AS PER RULE 7 OF POT RULES

SERVICE TAX PAYABLE A/C.....DR

TO BANK A/C

AT THE TIME OF TAKING CENVAT CREDIT

CENVAT CREDIT RECEIVED A/C..DR

TO SERVICE TAX A/C

CA jignesh daiya (CA ) (446 Points)
Replied 27 November 2015

TAXATION POINT:-

SECURITY SERVICE CHARGE IS COVER BY 100% REVERCE CHARGE HENCE IN THIS CASE SERVICE RECEIVER IS LIABLE TO PAY SERVICE TAX

AS PER RULE 7 OF POINT OF TAXATION IN THIS CASE IS DATE OF PAYEMENT IF PAYEMENT MADE WITHIN 3 MONTH OF INVOICE DATE ELSE NEXT DAY AFTER COMPLETION OF 3 MONTH

AS PER CENVAT PROVISON, SERVICE RECIVER IS ELIGIBLE TO TAKE CENVAT CREDIT ON TIME OF APYEMENT OF SERVICE TAX IRRESPECTIVE OF PAYEMENT TO SERVICE PROVIDER

ACCOUNTING ENTRY

AT THE TIME OF RECEIPT OF INVOICE

SECURITY SERVICE A/C ......DR

TO SERVICE PROVIDER A/C

TO SERVICE TAX PAYABLE A/C

AT THE TIME OF PAYEMENT TO SERVICE PROVIDER IF WITHIN 3 MONTH OF INVOICE

SERVICE PROVIDER A/C ;;;DR

TO BANK A/C

AT THE TIME OF MAKING PAYEMENT OF SERVICE TAX AS PER RULE 7 OF POT RULES

SERVICE TAX PAYABLE A/C.....DR

TO BANK A/C

AT THE TIME OF TAKING CENVAT CREDIT

CENVAT CREDIT RECEIVED A/C..DR

TO SERVICE TAX A/C

Manikanth (Chartered Accountant) (342 Points)
Replied 27 November 2015

Security Service A/c Dr 10,000 (under Indirect Expenses)

Service tax input but not due a/c Dr 1,250 (current asset)

To Party a/c 10,000 (Creditor)

To Service tax Payable a/c 1,250 (Current Liability)

(Being Security Services availed due for payment and ST thereon is payable by RCM)

Party A/c Dr 10,000

To Bank A/c 10,000

(Being payment made to party)

3) Service tax Payable A/c Dr 1250

To Bank A/c 1250

(Being ST Paid)

4) Service tax input A/c Dr 1250 (under Current asset)

To Service tax input but not due a/c 1250

(Being ST will be availed by service recepient only after the payment of ST under RCM)

1 Like

Manikanth (Chartered Accountant) (342 Points)
Replied 27 November 2015

If Payment is made within 3 months from the date of Invoice, then ST paid under RCM by Service receiver will be eligible for Cenvat Credit,

Otherwise no Cenvat credit can be availed, So, entry no. 4 will not be made.

CA jignesh daiya (CA ) (446 Points)
Replied 27 November 2015

PLEASE GIVE REFERENCE FOR CONDITION OF CENVAT CREDIT YOU HAVE STATED IN ABOVE POINT

CA jignesh daiya (CA ) (446 Points)
Replied 27 November 2015

PLEASE GIVE REFERENCE FOR CONDITION OF CENVAT CREDIT YOU HAVE STATED IN ABOVE POINT

gupta (Accountant) (305 Points)
Replied 27 November 2015

Sir

Thanks for your prompt reply.

The 4th entry portion I have some confusion :

What is Service tax input but not due a/c: - In Tally under which it will come and how this account will be square off.

We are depositing Service Tax on quarterly basis as our concern is a proprietor ship business.

Waiting for your reply

Jayanta

jaimin patel (n.a) (24 Points)
Replied 27 November 2015

DR SECURITY EXP

DR S.TAX PENDING CREDIT(RCM)

CR SERVICE PROVIDER

CR TDS ON CONTRACTOR 94C

CR S.TAX ON MANPOWER SUPPLY SERVICE(RCM)

gupta (Accountant) (305 Points)
Replied 27 November 2015

Dear Manikant Ji

Waiting for your clarification.

Please give reply.

Regards

Jayanta

Manikanth (Chartered Accountant) (342 Points)
Replied 28 November 2015

Service Tax Input but not due a/c will come under the head Current asset.

As you have made the payment to the concerned party, the liability for the payment of Service Tax has arisen. So till you make payment of ST to dept under RCM, you are not eligible for the Input tax Credit of Service Tax. Therefore a new ledger to be created with the name “Service Tax Input but not due”.

When you made payment of ST, then you are eligible for Input tax credit, then the entry will be

Service Tax Input a/c Dr

To Service tax input credit but not due a/c

With this entry "Service tax input credit but not due a/c" is nullified.

1 Like

naveena k c (Accounts Assistance) (27 Points)
Replied 11 April 2017

Dear Sir,

first we shoud pass the following entry for RCM

1. Dr security charges (expenses) 100

Dr Reverse Charge input account 14

Cr service provider (party/vendor Name) 99

Cr TDS on Contractor 1

Cr RCM Payable 14.

2. Dr Service Provider/Party account 99

Cr Cash/Bank Account 99.

3. Dr RCM Payable 14

Cr Cash/Bank Account 14.

after RCM Paid we have to take input for that.

4. Dr Service Tax Input Account 14

Cr Reverse Charges Inout Account 14.

Thanks

1 Like

pardeepkumar (M.Com) (35 Points)
Replied 07 September 2017

I want to ask : Suppose normal net tax liability for a month 10000/- and bills received on which tax tobe calculated under RCM suppose 2500/- for the same month, now what we amount we have to deposited under which heads, kindly clarify.

thanks in advance

pardeep