Dear All
I have a query relating to service tax. Given below is a case study.
Company A raises a bill of Rs 20, 00,000/ dated 01.07.2010 on its subsidiary Company B and charges service tax @ 10.3% for Rs 2,06,000/- ( Total Bill Amount of Rs 22,06,000 ). Company B recognizes the expense for Rs 20, 00,000/-, service tax input of Rs 2, 06,000/- and also deducts TDS @ 2% for Rs 44,120/- on 01.07.2010 ( since TDS to be deducted at the time of payment or credit whichever is earlier)
Company A also recognizes the TDS receivable of Rs 44,120 in the month of July 2010.
Now Company B makes the final payment of the bill net of TDS for Rs 21, 61,880/- on 01.08.2010 to Company A.
Query:
Whether the output service tax liability for Company A arises wholly in the month of August for Rs 2, 06,000 /-
OR
Rs 4120/- in the month of July (on the basis of TDS recognized viz 44120/110.3*10.3) and Rs 201880 ( on the basis of balance receipt viz 21,61,880/110.3*10.3 ) in the month of August thereby totaling to Rs 2,06,000/-
Please advice whether the second alternative is acceptable or not under the relevant tax laws.
CAclubindia
