Accounting of service tax

You can pass the below entry:

Debtor's A/c  Dr.

   To Commission Income A/c

   To Service Tax payable A/c

(with respective figures)

comm inc will go undr direct income

st payable will go undr currnt liab. & prov.

In my opinion, following should be the entries:

While Raising the debit note:

Debtors                                            Debit     83768.86

Service tax recoverable                 Debit     10354

To Commission                                            83768.86

To Service tax payable                                 10354

When the payment is received:

Cash/Bank                          Debit     94122.86

To Debtors                                          83768.86

To Service Tax Recoverable         10354

This will help you differentiate and keep track of the service tax recoverable and revenue related debtors also.

Regards

Sheli

Originally posted by : Sheli Sehrawat
	In my opinion, following should be the entries:   While Raising the debit note: Debtors                                            Debit     83768.86 Service tax recoverable                 Debit     10354 To Commission                                            83768.86 To Service tax payable                                 10354   When the payment is received: Cash/Bank                          Debit     94122.86 To Debtors                                          83768.86 To Service Tax Recoverable         10354   This will help you differentiate and keep track of the service tax recoverable and revenue related debtors also.   Regards   Sheli

everything is right but one problem ariess i.e. after payment of service tax, outstanding service tax payable account show for ......

@ Pijush .. I guess you didn't notice that there are two GLs for Service Tax.. 1. for the amount which is due to the customer (Service Tax Recoverable). 2. for the amount which is payable to govt. by the organisation (Service Tax Payable). When the organisation will pay the service tax amount to the govt., the following journal entry will be passed:

Service Tax Payable    Debit

To Bank

So both account will be sttled against corresponding receipt/payment.

Regards

Sheli Sehrawat

Yes...Sheli is right  !!

Hi

Sheli

Good answer But the point remain Under which group i open above accounts.cuz.

We raised the debit note.Pay service tax to Govt.Same Claim from Company.

means we treated as service tax rece.from company but actually they pay only commission only. thats why we pay service tax & then claim.

Originally posted by : rajeev
	Hi Sheli Good answer But the point remain Under which group i open above accounts.cuz. We raised the debit note.Pay service tax to Govt.Same Claim from Company. means we treated as service tax rece.from company but actually they pay only commission only. thats why we pay service tax & then claim.

Rajeev Sir,

The concept you told is absolutely right in case of normal logic. But as per the Service Tax Rules, if you receive Rs. 100 from customer against commision, by default the bifurcation will be assumed as follows:

Commision: Rs. 87.64

Service Tax : Rs.12

Edu Cess   : Rs. 0.3

Sec & Higher Edu Cess : Rs. 0.06

So, the receivable should also be accounted.

Now, you said that we first pay to the Govt. and then claim the service tax from client company.

Sir, you must be knowing that even if customer doesn't pay you the service tax amount exclusively, your liability of paying service tax to the Govt. is not disolved. So in any case, you have to assume that any amount paid by customer includes Service Tax amount. So in the above example, you cannot account Rs. 12.36 as commission because that's against service tax. Its not your revenue but an Indirect Tax which should be received from client and paid to govt.

Further, I didn't get your ques about "head" under which it should be booked. Its a normal receivable and should come under current asset head.

Regards

Sheli

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