JOURNAL ENTRY FOR MANPOWER SERVICE INCLUDING SERVICE TAX REVERSE CHARGE
Journal entry for manpower expense
with service tax reverses charge
As per
service tax rules under reverse mechanism if service receiver is either private
Ltd /Public Ltd and service provider is Sole proprietor /Partnership firm. Then
service receiver has to pay service tax instead of service provider. This is
applicable for both Man power services and work contract.
Particular
Service
provider share service receiver share
Manpower
service 0% 100%
Work contract 50% 50%
As per Notification Number:- 10/2014-ST and 30/2012-ST.
Note: Manpower service means Labour
charges, Security service & House Keeping service
Journal Entry for Manpower servicewith
Service Tax
Security
charges of Rs.10000/- from Supreme services
Security Charges A/C Dr 10000
Service Tax Received A/C Dr 200
To Supreme
services A/C 9800
To Service
tax Payable A/C 200
To TDS
payable A/C 200
(Narration:
- Being Transport charges booked.)
The rules
for passing Journal entry
Debit
Professional
charges is expense for business and the same shown on profit on loss account at
the year end. So, as per nominal account rule(Security charges) "debit all
expense or loss"(Expense)
Debit
As we are
paying duties on carriage inward are eligible for Input credit and treated as
asset.(I.e. the taxes paid to creditors are not expense and it has to be
treated as asset and can be set off against the duties payable, But before
treating it as asset the input eligibility should be checked. Normally the purchase
related to manufacture Except Factory building items Ex-Cement& steel can
be availed as Input credit)Ex: - EXCISE DUTY, VAT & SERVICE TAX.
Credit
Due to
credit purchase we are liable to him. And he is selling us the goods on
credit.The creditors balance will increase.
As per
personal account rule (supreme service) "Credit the giver
account"(Current Liability)
Credit
Service
payable will be treated as representative person. When duties are payable will
be treated as liability and shown as current liability on liabilities side of
balance sheet. So, As per personal account rule (Service Tax payable)
"credit the giver account"(Current liability)
service tax
can be taken as CENVAT hence it is treated as Current asset. Everyone should
remember that service tax receivable cannot be adjusted against the service tax
payable, it is only adjusted against Excise duty payable.
The service
tax payable will be paid by the company to department.
Credit
TDS payable
will be treated as representative person. When duties are payable will be
treated as liability and shown as current liability on liabilities side of
balance sheet. So, As per personal account rule (TDS payable) "credit the
giver account"(Current liability)
Here in above case TDS is calculated on Professional
charges excluding service tax .TDS @ 2% on 10000 =200/-
Journal Entry for Work Contract
services with Service Tax
Work
Contract services of Rs.10000/- from Madras construction
Building(WIP) A/C Dr 10000
Service Tax A/C Dr 200
ToMadras
construction A/C 9800
To Service
tax Payable A/C 200
To TDS
payable A/C 200
(Narration:
- Being Transport charges booked.)
The rules
for passing Journal entry
Debit
Buildingrelated
capital expenditure will lead to increase in assets. So, as per Real account
rule (machinery) “Debit what comes into business"
Debit
As we are
paying duties on Building related capital expenditure is not eligible for Input
credit and treated as expense. So, as per nominal account rule(service
tax)"debit all expense or loss"(Expense)service tax paid is not
eligible for CENVAT credit as per Rules so it is treated as expense.
Credit
Due to
credit purchase we are liable to him. And he is selling us the goods on
credit.The creditors balance will increase.
As per
personal account rule (madras construction) "Credit the giver
account"(Current Liability)
Credit
Service
payable will be treated as representative person. When duties are payable will
be treated as liability and shown as current liability on liabilities side of
balance sheet. So, As per personal account rule (Service Tax payable)
"credit the giver account"(Current liability)
service tax
can be taken as CENVAT hence it is treated as Current asset. Everyone should
remember that service tax receivable cannot be adjusted against the service tax
payable, it is only adjusted against Excise duty payable.
The service
tax payable will be paid by the company to department.
Credit
TDS payable
will be treated as representative person. When duties are payable will be
treated as liability and shown as current liability on liabilities side of
balance sheet. So, As per personal account rule (TDS payable) "credit the
giver account"(Current liability)Here in above case TDS is calculated on Professional charges excluding
service tax .TDS @ 2% on 10000 =200/-
Here service tax to be debited to the WIP account and not to the seperate cost account as per AS 10
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