What would be journal entry for purchase invoice

For e.g. I purchase goods worth 5 lakhs from ABC Co. and i get purchase invoice for it. Now, in the bill, goods are worth 4.5 lakhs and 25 thousand is for Service Tax and 25 thousand is for VAT. This is just a example. In this case, when i am passing journal entry, what would be the journal entry. Should there be a seperate legder for the Service Tax and VAT or not. Because, in the end, i have to pay 5 lakh to ABC Co. so whats the point of passing a journal entry for Service Tax and VAT. 

 

According to me, To Purchase A/C 5 lakh and By ABC Co. 5 lakh

but my friend says, To Purchase A/C 4.5, To Service Tax 25k, To VAT 25k and By ABC 5 lakh.

 

Which one is correct or both of us are wrong?

 

 

 

Replies (2)

1) If input tax credit for input vat & service tax can be taken :-

Works or Purchase A/c      Dr.   4.5

Input Service Tax A/c Dr.  0.25

Input VAT A/c  Dr.    0.25      

  To ABC                                   5

2) If input tax credit for input vat & service tax cannot be taken:-

Works or Purchase A/c    Dr.    5

   To ABC                         5

 

Mr. Vishal Gupta suggestion is obsolutely correct. Input tax credit is to be consider.

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