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SERVICE TAX TREATMENT IN ACCOUNTS

Manohar (28 Points)

10 May 2007

RESPECTED ALL,

I HV A QUERY REGARDING TREATMENT OF SERVICE TAX IN ACCOUNTS.

SERVICE TAX COLLECTED FROM PARTIES WHETHER WILL BE INCLUDED IN SALES UNDER PROFIT AND LOSS ACCOUNT OR IT WILL SHOWN UNDER CURRENT LIABILITIES. AS SERVICE TAX IS PAYABLE TO SERVICE TAX DEPTT ON RECEIPT BASIS.

EG:
SERVICE INCOME 100.00 GROUPED IN SALES
SERVICE TAX @ 10.20% 10.20 WHERE TO GROUP.

WHAT ABT ICAI-AS REGARDING SERVICE TAX TREATMENT

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4 Replies

Dattatreya (13 Points)
Replied 10 May 2007

In my opinion it should not be included in sales, like tds treatment the same treatement will apply. Moreover in service tax case there is adjustement like cenevat credit, before applying we have to consider this also.

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Cagaurav (58 Points)
Replied 10 May 2007

hello this is gaurav

service tax should be shown seprately and it should not be shown in sales figure say service tax liability occurs only when payment is received from party in should be shown under head duties & taxes under head current liablities.

u can mail me at cagaurav1234 @ gmail.com
or wanna contact at 9313198281

Vishwa (CA Job) (87 Points)
Replied 10 May 2007

Hi,

in profit and loss account, services tax treatment :

sales rs 100
Services tax Rs 10.20

Total turn over Rs 110.20

Vishu (34 Points)
Replied 10 May 2007

ser ic e tax should be treated like other indirect taxes such as excise and sales tax. It should be added to the sales turnover but should show seperately as service tax receovered in profit and loss account. while service tax payable ( ie service tax payable on services billed but not yet recd. debtors) should be shown as current liability.

In future if one invoice - debtors turn bad or cancelled , then the amount of service tax include on such sales invoice shall also be written off.

See for example :Sales Rs 100000; ser tax rate 10.2%, debtors Rs 20000 and sales reced Rs 80000/-. So Service tax recd and paid to govt Rs 8160(10.2%) during the year and Rs 2040 (10.2% on Rs 20000) is payable and included in Debtors.and will apy after receipt.
Solution:

PROFIT AND LOSS EXTRACT
Income:

sales Rs 100000
service tax recov Rs 10200 Rs 110200

Less: Expd

admin expenses Rs 20000
finance expenses Rs 30000
Service tax paid Rs 8160 Rs 58160

Profit Rs 52040

B/Sheet Extract

Curent Liability
Service tax Payable Rs 2040/-

Current assets
Debtors Rs 22040/-

Hope this example will clear your accopunt doubt at least.

Regds
Vishwajeet