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Reverse charge entry and utilisation of service tax

prithviraj mohandoss (Finance associates) (143 Points)

23 March 2013

Hi,

We are shipping Company. we got a service from our lawyer, as a service we received Invoice of RS.25,000.

Apparently Reverse charge rule apply on this invoice...

Would like to know how to make entry in Tally. once i pay service tax can i consider that as INPUT

With regard to TDS Do i have to consider Service Tax Rs.3090 (25,000 * 12.36= 3090) while Deducting TDS,.

Exclude Service Tax 194J TDS Deduction Value Rs. 2,500/- (25,000 * 10/100)

Including Service Tax 194J TDS Deduction Value Rs.2,809/- (28,090 * 10/100)

Please let me know

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10 Replies

aishwarya s raghavan (student) (224 Points)
Replied 23 March 2013

Dear Sir, In case of legal charges, 100% of service tax liability falls under the service receiver. The entry will be as follows Legal fees a/c Dr To Lawyer a/c To TDS on professional charges Service tax receivable a/c Dr To service tax reverse charge a/c

Ankit Agarwalla (CA) (281 Points)
Replied 23 March 2013

TDS will be deducted on whole amount inclusive of ST as under RCM the Service Receiver is just meeting the liability of Provider & is availing credit for the same.

So, as earlier, TDS has to be deducted on total payable amount i.e. 28090/-

Regards

aishwarya s raghavan (student) (224 Points)
Replied 24 March 2013

Dear Ankit! Isn't TDS deductible only on Rs.25000/- amount payable to the advocate. The st under reverse charge is our liability directly towards govt right? Please clarify

TKKKKKK (PRACTICING CA) (3268 Points)
Replied 24 March 2013

aishwarya is right

legal fees dr 25000

to lawyer a/c 22500

to t.d.s a/c 2500

sevice tax under reverse charge dr 3090

to bank /cash 3090

prithviraj mohandoss (Finance associates) (143 Points)
Replied 25 March 2013

This is an Legal Fees 100% service tax liability falls on us.

Ankit Can you clarify what Aiswaray asked you...

Ankit Agarwalla (CA) (281 Points)
Replied 25 March 2013

This is an already resolved query . .go to /experts/tds-on-service-tax-962220.asp#.UVBghxykxCA for details.

You can also check out this link https://taxaccountvatca.blogspot.in/2012/01/tds-on-service-tax-value-or-excluding.html for accurate references.

abhishek bhandari (charated accountant) (33 Points)
Replied 29 August 2013

why to deduct tds on amout including service tax . Service tax liability is of Service reciver under reversal charge. So service tax is directly deposit to Govt account. And Tds is not to deducted on service tax .

Nitesh Choraria (Member) (35 Points)
Replied 26 November 2013

Please refer the judgment of the Hon’ble Rajasthan High Court, in the case of:

Commissioner of Income Tax (TDS), Jaipur Vs. M/s. Rajasthan Urban Infrastructure [2013 (8) TMI 12 – RAJASTHAN HIGH COURT] on following issue:

Issue:

Whether TDS is to be deducted on the amount of Service Tax charged on professional/ technical fees under Section 194J of the Income Tax Act, 1961?

Facts & Background:

M/s Rajasthan Urban Infrastructure Development Project (“the Respondent or the RUIDP or the assessee”) is a project of Government of Rajasthan for the Infrastructure Development and Civic Amenities in the specified areas/ cities in the state of Rajasthan. The RUIDP appoints the technical and project consultants and deducts income tax at source from the amount of fee payable as per the agreement and deposit the same as per the relevant provisions of the Income Tax Act, 1961 (“the Income Tax Act”) and subsequently files the return for the same within due time.

The Assessing Officer, vide its order dated 30.01.2009 raised a demand of Rs. 1,70,881/- along with interest thereon amounting to Rs. 44,776/-, on account of TDS on the amount paid as Service Tax pertaining to Financial Year 2005-06. The assessee preferred an appeal before the Commissioner of Income Tax (Appeals), Jaipur which was allowed. Being aggrieved with the same, the Revenue filed an appeal before the Income Tax Appellate Tribunal, Jaipur but the same was dismissed. Hence the revenue preferred an appeal before the Hon’ble Rajasthan High Court.

Held:

It was held by the Hon’ble Rajasthan High Court that if Service tax is payable in addition to professional/ technical fees under the contract, the withholding tax will be restricted to the professional fees. Hence, examination of contract terms is imperative

The Hon’ble Rajasthan High Court held that the words “any sum paid” used inSection 194J of the Income Tax Act, 1961, relate to “fees for professional services or fees for technical services”. In terms of the agreement, the amount of Service Tax was to be paid separately and was not included in the fees. Hence the orders passed by Appellate Authority as well as the Appellate Tribunal are in accordance with the provisions of Section 194J of the Income Tax Act, 1961.