TDS and service tax on royalty payment

Compute the TDS on the gross amount payable to foreign company and pay the net amount after deducting TDS and compute the service tax on the same amount @ 12.36% and pay to government

Accounting entry

1. Expenses A/c Dr             (Bill Amount)

    Expenses A/c Dr             (Service Tax Amount)

                 To TDS Payable to Govt.                                ( TDS Amount)

                  To Bank/ Party                                                  ( Net Amount Paid/Payable)

                 To Service tax payable A/c                                (Service Tax Amount)

If you are service provider or Manufacturer than you can avail the CENVAT credit of the amount paid as service tax.