Service tax liability and accounting

In my opinion, provision for service tax payable on 31-03-2011 is not require

Provision has to be created, if the management fee is payable for the year 2010-11. Because, any statutory dues payable has to be shown separately nd to receive comments from auditor. And also keep in mind that payment towards service provided to associated enterprise is deemed to be received when credited or debited in books. Hence, you should have paid service tax by 31-3-2011 if management fee belongs to that year. Now you have two options 1) dont show management fee in the accounts for the year 10-11. 2) pay service tax with interest.

Dear Sumedha

Mr. Cherukuri is right.

Actually till 30th June 2011 Service tax is payable on reciept basis. i.e., When you receive payment for your services then payment of service tax is due. In case of Import of service under reverse charge on when you make payment, service tax payment is due.

 

Whereas there is an exception to the above rule, which is In case of associated enterprises. Service tax liability arises as soon as there is a book entry.

Thus there is an option not to take entry into books.

But, you should also consider the accrual concept of Accounting, where in you have to make an entry for the services received .

Based on above discussion I think provision has to be created.

Thanks a lot to all..