Scribd
Upload
172 views

Reverse Charge in Service Tax

1. The document discusses reverse charge service tax in India, where the tax is paid by the service receiver instead of the service provider. 2. New services have been added to the reverse charge category from July 1, 2012, and the general 10 lakh exemption does not apply for service receivers under reverse charge. 3. The document provides examples of how to account for reverse charge transactions in Tally ERP 9, including creating ledgers for the service provider and service, recording journal and payment vouchers, and generating reports.

Uploaded by

vishalsolshe
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
172 views

Reverse Charge in Service Tax

1. The document discusses reverse charge service tax in India, where the tax is paid by the service receiver instead of the service provider. 2. New services have been added to the reverse charge category from July 1, 2012, and the general 10 lakh exemption does not apply for service receivers under reverse charge. 3. The document provides examples of how to account for reverse charge transactions in Tally ERP 9, including creating ledgers for the service provider and service, recording journal and payment vouchers, and generating reports.

Uploaded by

vishalsolshe
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 14

Reverse Charge in Service Tax [Service Tax]

in Tally.ERP 9
Reverse Charge - Service Tax being paid by service
receiver instead of Service Provider is already practiced
in case of GTA transactions and Import of Services.
With effect from 01-07-2012, few more service
categories have been included under Reverse Charge.
Under this approach, for the payment of Service Tax,
Service receiver cannot claim the general exemption of
10 lakhs.
Under this scheme new services with partial reverse
charges are introduced. Where the service provider and
receiver are liable to pay Service Tax in prescribed ratio
Example: Full & partial reverse charge services
Description of % of % of
Services Service Tax Service Tax
payable by payable by
the Service the Service
Provider Receiver
Transportation of Nil 100%
goods by road
Nil
Sponsorship 100%
Services
Supply of 25% 75%
manpower or
security agencies
50%
Works Contract 50%

Using Tally.ERP 9 users can account all the reverse


change services.
Example: ABC Company
received services from Vibha
Security Agency for Rs.
1,54,635. While raising the
invoice service Provider has
charged Service Tax on 25% of
the Services. On 75% of the
assessable value, ABC Company
has to calculate Service Tax
payable to the government.
To record the above transaction
1. Create the Service Provider Ledger
2. Create the Service Ledger
3. Record the Transaction in Journal/Purchase Voucher
(to account the expenses)
4. Record the Payment Voucher (to account the
payment)
5. Record a Journal Voucher (to raise Service Tax
liability)

1. Create the Service Provider ledger

Go to Gateway of Tally > Accounts Info. > Ledgers


> Create
In the Ledger Creation screen:
Enter the Name of the Party Ledger e.g. Sri
Road Transporters.
Select Sundry Creditors from the List of Groups
in the Under field.
Set Maintain balances bill-by-bill to Yes.
Enter the Default Credit Period, if required.
Set Is Service Provider/Receiver to Yes.
Set the option Set/Alter Service Tax
Details to Yes and press enter to view Service
Tax Details screen
In Service Tax Details screen enter
o Registration Number and Date of Registration (This is not mandatory).

o Type of Classification: In this field select Reverse Charge from the list of Classifications.

[Img-193]
Enter
the Mailing Details and Tax Information
Press Enter to accept and save.

2. Create Expenses Ledger

Go to Gateway of Tally > Accounts Info. > Ledgers


> Create
Enter the Name of the service expense ledger
you wish to create, for e.g., Security Services
Select Indirect Expenses as the group name in
the Under field.
Set Inventory values are affected to No.
Set Is Service Tax Applicable to Yes.
In Default Service Category field
select Taxable Service from the List of
Service Categories.
Note : A s per Ci rcul ar No. 165/ 16/ 201 2-
S T, w.e. f. November 20, 201 2, serv i ce-
sp eci f ic accounti ng codes hav e been
restor ed. For transa cti ons record ed on
and af ter the 20th of N ovembe r, 201 2,
the ap propri ate serv i ce category has to
b e chosen. For more detail s, c l i c k h e r e .
Press Enter to save.

3. Record the Transaction in Purchase


Voucher (to account the expenses)

To record the Purchase Voucher


Go to Gateway of Tally > Accounting Vouchers >
F9: Purchase
1.Press F2 and change the date to 2-11-2012
2.In Party A/c Name field select Vibha Security
Agency
3.Under Particulars, select Service Ledger
- Security Services and press enter to view
Service Tax Details screen.
4.In Service Tax Details screen
In Type of Ref field select New Ref from the
Method of Adjustment.
In Name field accept the default reference
Number displayed Purc/13-1 which can be
changed by the user.
In Type of Service field service type
- Reverse Charge selected in party ledger will
be defaulted.
In Category/Service field the service category
selected in the Service Ledger will be defaulted.
Press F12: configure and enable the
option Allow to override Service Category
during entry to Yes and save.
Note : A s per the new Rev ers e C harge
sy stem, on S ecuri ty S erv ices Serv ice
Pr ovi d er is liabl e to pay tax on 25% of
the ass essabl e Value w hil e rai si ng the
i nvoice. On the remai ning 7 5% of the
A ssessa bl e Val ue the servi ce rec ei v er is
li abl e to pay tax.
Press backspace key to navigate
to Category/Service field and press Enter to
view Taxable Percentage screen.
Enter 100% in Taxable Percentage field
In Tax Liability % (Service Provider) field,
enter 25%

[Img-194]
Note : In Re le ase 3 .7 , Tax L iabili ty of
serv i ce provi der has to be speci fi ed
i n Ta xable Pe r ce ntage fi el d:

[Img-195]

The provi si on to speci fy tax abl e


p ercenta ge as w ell as the tax liabili ty of
the serv i ce provi der in Tax abl e
Percenta ge scr een i s avail abl e from
Rel eas e 4. 5 onward s.
Service Amount: In this field enter the Service
Amount of Rs. 1,50,000
Amount (Incl. of Tax): The amount specified
in Service Amount field plus Service Tax will be
displayed in this field.

[Img-196]
Note : S ervi ce Tax i s C alcul ated on 25%
of the A ssessabl e Value i .e. 375 00.
5.In Amount field Service Amount of Rs. 1,50,000
will be displayed
6.Select Service Tax Ledger e.g. Service Tax @
12%. Service Tax amount will be calculated and
displayed automatically.
7.Select Education Cess Ledger e.g. Education
Cess @ 2%. Education Cess amount will be
calculated and displayed automatically.
7.Select Secondary and Higher Education Cess
Ledger e.g. Secondary Education Cess @ 1%.
Secondary and Higher Education Cess amount
will be calculated and displayed automatically.
7.In Bill-wise Details screen
In Type of Ref select New Ref
In Name field enter the bill number - Bill-0568
Amount will be defaulted automatically
The completed Purchase Voucher is displayed as
shown:

[Img-197]
10. Press Enter to save and accept
Note : Re ve r se C hange t ransa cti ons wi ll
b e di spl ayed in Tax on Se r vice s
Re ce ive d re port w hen accounted.
Once the purchase t rans acti on i s
recor ded, the ex tent of i nput cre di t
avai labl e can be v iew ed in
the I nput Cr edi t S um m ar y report.

4. Record the Payment Voucher (to account


the payment)

On reverse charge transactions Service Tax liability on


the service receiver arises only on making the
payment to the service provider.
Go to Gateway of Tally > Accounting Vouchers >
F5: Payment
1.Press F2 and change the date to 5-11-2012
2.In Debit field select Vibha Security
Agency ledger and press enter to view Service
Tax Details screen
3.In Service Tax Details screen
In Type of Ref field select Agst Ref
In Name field select Purc/13-1 dated 2-11-
2012 to adjust the Pending Tax Bills
Based on the tax bill selected Type of Ref,
Category, Amount (Incl. of Tax) and Service
Amount will be defaulted.
4.In Bill-wise Details screen
In Type of Ref field select Agst Ref
In Name field select Bill-0568 to adjust the
pending bill against the payment
Rs. 1,54,635 will be defaulted in Amount field.
5.In Credit field select Canara Bank
The completed Payment Voucher is displayed as shown:

[Img-198]
6.Press Enter to save and accept.

5. Record a Journal Voucher (to create


Service Tax liability)

The liability of tax towards Security services will arises


only on payment to the service provider.
To create Service Tax Liability on Security services,
create the Voucher Class in Journal Voucher. To create
voucher class refer - Create the Voucher Class in
Journal Voucher
To record the transaction,
Go to Gateway of Tally > Accounting Vouchers >
F7: Journal
1.In Change Voucher Type screen, in Class field
select Service Tax Adjustments from Voucher
Class list
2.Press F2 and change the date to 5-11-2011
2.In Used for field select Tax on Reverse
Charge from the list of Service Tax
Adjustments

[Img-199]
4.Press Enter to view Tax on Reverse
Charge screen to calculate Service Tax liability
4.In Service Tax Liability screen
In Till Date select the Voucher date to account
all the reverse charge services purchased till the
date of accounting the Service Tax liability. By
default Voucher Date 5-11-2012 will be
displayed.
In Service Category field select the service
received from the List of Service Categories.
Note : You can sel ect the opti on Any to
consi der all those serv i ce cate gori es
w hi ch are recei ved on which serv i ce
rec ei ver is liabl e to comput e the S ervi ce
Tax liabili ty.
Avail Input Credit: Set this option to Yes to
consider the Service Tax amount paid towards
the security services as Input Credit for further
adjustment
In Party Ledger field select the service
provider - Vibha Security Agency from the List
of Ledger Accounts
Note : You can sel ect the opti on Any to
consi der all those parti es f rom whom the
rev erse charge serv i ces are rec ei ved
comput e the S ervi ce Tax li abi li ty.
In Output Ledgers section select
o Service Tax @ 12% to account Service Tax

o Education Cess @ 2% to account Education Cess

o Secondary Education Cess @ 1% to account Secondary and Higher Education Cess

Note : In O utput L edger s sec ti on


S ervi ce Tax ledg ers are sel ecte d
to com pute (cal culate) and cr e ate the
S ervi ce Tax liabili ty (to be payabl e) on
the se curi ty servi ces purchased .
In Input /Expense Ledgers section select
o Service Tax @ 12% to account Service Tax

o Education Cess @ 2% to account Education Cess

o Secondary Education Cess @ 1% to account Secondary and Higher Education Cess

[Img-200]
6.On accepting the Service Tax Liability screen,
Tally.ERP 9 Auto fills the details in Journal Voucher
[Img-201]
7.Press Enter to save and accept.
On payment of Service Tax to the Government, the tax
paid towards security services will be displayed
in Input Credit Summary Report.
To view the Input Credit Summary report,
Go to Gateway of Tally > Display > Statutory
Reports > Service Tax Reports > Input Credit
Summary

You might also like