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/-