Doubt abt the treatment

it will not be an expenses or income for us.. it will be  liability till it is not paid.

service tax paid will come under expenditure and can be claimed under section 40(a).

Service Tax is to be treated as a liability and will not appear in the income and expenditure account.

The entries shall be as under.

Debtor Dr  100

To sale of service  88

To service Tax         12

 

Bank Dr              100

To Debtor                         100

Service Tax Dr       12

To Bank                                 12

 

(Cess is not considered)

Service Tax collected will be treated as currently liability (Duties and Taxes)

How would u treat the following??? Total sales-500 Billing Tax (Service Tax)-60 Collection tax (Service Tax)-45 (inclusive of input credit) Input credit taken is-15 So after taking credit,we remit only the net figure i.e. 30 to the govt. is this 30 be shown as deduction from total sales in p&L Thanks in advance, Chirag

Since you have not paid anything out of your own pocket but have reimbursed it from the person from whom commission is received, service tax cannot be charged to Profit and Loss Account. The amount of service tax Charged by yoy shall be credited to Service Tax Payable Account and when you pay it to the Govt account the Service Tax Account get squared up. But if no payment of service Tax is made by the service user the amount of the service tax charged by you in the bill has to be borne by you and in that case you have to debit the amount of service tax paid to Profit & Loss Account.