Tax on Services Purchased

When a Goods Transport Agency (GTA) is hired by you for transporting raw material or finished goods or any other purpose relevant to business, liability to pay the service tax on the transport service received will be on the service receiver.

As per Service tax Rules, Services provided by a GTA in relation to transportation of goods is leviable to service tax under GTA service [section 65(105)(zzp)]. Service tax for the GTA service provided is payable only on 25% of the amount charged for providing the GTA service and the balance amount is exempt from levy of service tax.

Service Input Credit on Services Purchased

Tally.ERP 9 facilitates the recording of purchase of services from (GTA) and calculating the service tax payable.

Example: On 10-8-2012 ABC Company purchased transportations services from Sri Road Transporters for Rs. 25000.

 

On the same day payment was made to the transporter and service tax liability towards goods transport is raised.

To record the above Transaction

1. Create the Service Provider ledger

2. Create Expenses ledger

3. Record the Transaction in Journal 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:

Note:Select the option Tax on Service Received when the transport services are purchased and the service receiver is liable to pay the tax.

2. Create Expenses Ledger

Go to Gateway of Tally > Accounts Info. > Ledgers > Create

Note: All the Expenses subject to Service Tax have to be associated with relevant predefined Service Category.

 

The option Any can be selected from the List of Service Categories, where the user doesn't want to define the Service Category during Ledger creation. This allows the user to use an Purchase/Expense Ledger (as a common ledger) to account multiple Service Categories.

 

From Rel 4.8 an option to provide Bank Details is provided in the Ledger Master.

 

  1. Press Enter to save.

3. Record the Transaction in Purchase Voucher (to account the expenses)

To record the Journal Voucher

Go to Gateway of Tally > Accounting Vouchers > F9: Purchase

  1. Press F2 and change the date to 10-08-2012

  2. In Debit field select Carriage Expenses ledger and press enter to view Service Tax Details screen

  3. In Service Tax Details screen

  4. In Type of Ref field select New Ref from the Method of Adjustment.

  5. In Name field accept the default reference Number displayed Jrnl /5-1 which can be changed by the user.

  6. In Type of Service field select Tax on Service Received from the list of Type of Service

  7. In Category field for Type of Service - Tax on Service Received, Taxable Service will be defaulted.

  8. Press F12: configure and enable the option Allow alteration of Abatement Rate during entry to Yes

Note: Tally.ERP 9 allows to enable the option Allow alteration of Abatement Rate during Entry only when the option Allow to Override Service Category during entry is set to Yes as the abatement is allowed for the service categories and Abatement Details screen will be displayed only when the cursor moves to Category field.

Note: ABC Company is taking Input credit on the Service Tax paid on GTA. As already mentioned Input Credit can be availed only when the tax is paid on the actual cost of the service. On GTA transactions Abatement allowed is 75% which will be considered by default. To avail credit, for this transaction rebate rate is set to ZERO and tax will be paid on actual cost.

  1. In Debit Amount field the Service Amount of Rs. 25,000 will be defaulted automatically

  2. In Credit field select the party ledger - Sri Road Transporters, Amount will be updated automatically.

  3. In Bill-wise Details screen

  4. In Type of Ref select New Ref

  5. In Name field enter the bill number - SRT/0025/12-13

  6. Amount will be defaulted automatically

The completed Purchase Voucher is displayed as shown

  1. Press Enter to save and Accept

4. Record the Payment Voucher (to account the payment)

Go to Gateway of Tally > Accounting Vouchers > F5: Payment

  1. Press F2 and change the date to 10-08-2012

  2. In Debit field select Sri Road Transporters ledger and press enter to view Service Tax Details screen

  3. In Service Tax Details screen

  4. In Type of Ref field select Agst Ref

  5. In Name field select Purc/11-1 dated 10-08-2012 to adjust the Pending Tax Bills

  6. Based on the tax bill selected Type of Ref, Category, Amount (Incl. of Tax) and Service Amount will be defaulted.

  1. In Bill-wise Details screen

  2. In Type of Ref field select Agst Ref

  3. In Name field select SRT/0025/12-13 to adjust the pending bill against the payment

  4. Rs. 25,000 will be defaulted in Amount field.

  1. In Credit field select Canara Bank

The completed Payment Voucher is displayed as shown

  1. Press Enter to save and Accept

5. Record a Journal Voucher (to raise service tax liability)

The liability of tax towards Goods Transported will arises only on payment to the service provider.

To account service tax on Goods Transported, 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

  1. Press F2 and change the date to 10-08-2012

  2. In Used for field select Tax on Service Received from the list of Service Tax Adjustments

  1. Press Enter to view Tax on Purchases - GTA screen to calculate service tax liability

  2. In Service Tax Liability screen

  3. In Till Date select the Voucher date to account all the goods transport services purchased till the date of accounting the service tax liability. By default Voucher Date 10-8-2012 will be displayed.

  4. In Service Category field select the service received - Taxable Service from the List of Service Categories.

Note: You can select the option Any to consider all those service categories which are received on which service receiver is liable to compute the service tax liability.

  1. Avail Input Credit: Set this option to Yes to consider the service tax amount paid towards the transport services purchased as input credit availed.

Note: As per CENVAT Credit Rules, Input Credit of service tax  paid by the service receiver on GTA Services will be available only if the service receiver is a taxable service provider.

 

* If the option Avail Input Credit is set to Yes the service tax paid will be eligible to Avail Input Credit and on payment of Tax to the government details will be displayed in Input Credit Summary report.

 

* If the option Avail Input Credit is set to No the service tax paid will be considered as a Expense.

 

ABC Company has opted to avail input credit on the service tax paid on the GTA services.

  1. In Party Ledger field select the party from services are service received - Sri Road Transporters from the list of GTA Partys' Ledger

Note: You can select the option Any to consider all those partys' from whom the GTA services are  received/purchased to compute the service tax liability.

  1. In Output Ledgers section select

  2. Service Tax @ 12% to account Service Tax

  3. Education Cess @ 2% to account Education Cess

  4. Secondary Education Cess @ 1% to account Secondary Education Cess

Note: In Output Ledgers section service tax ledgers are selected to compute (calculate) and create the service tax liability (to be payable) on the GTA Services Purchased .

  1. In Input /Expense Ledgers section select

  2. Service Tax @ 12% to account Service Tax

  3. Education Cess @ 2% to account Education Cess

  4. Secondary Education Cess @ 1% to account Secondary Education Cess

Note: In Input/Expenses Ledgers section the Tax ledgers are selected to transfer the computed tax liability as Input Credit if assess has opted to avail credit on tax paid on GTA services purchased/ received.

If the assess has not opted to avail the credit and has set the option Avail CENVAT Credit to No then the Tally.ERP 9 will display the list of Expense ledgers in Input /Expense Ledgers section to consider the tax paid on GTA services purchased/received as Expense.

  1. On accepting the Service Tax Liability screen, Tally.ERP 9 Auto fills the details in Journal Voucher

  1. Press Enter to save and Accept.

On payment of Service Tax to the Government,  the tax paid towards GTA 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


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