How to make entries of Service Tax in Tally

Dear Friends, You know very well about the Tally software. At present time Tally is one only most popular accounting cum inventory software that handles the day-to-day all routine operations of any business unit very effectively. Today we will discuss about the Service Tax in Tally. After reading this article you will be able to easily make all necessary entries of service tax in Tally.

Must Read: Pay online self assessment tax and advance tax

Tally provides different accounting and inventory features that allow any user to maintain his company accounts effectively. It is widely accepted by the different accounts for its user-friendly nature. Taxation part is much important part of Tally software. There are different types of tax either Direct Tax or Indirect Tax.

Definition of Service Tax:

Service tax is an indirect system of taxation which is imposed on specific category of service called “Taxable service”. The list of taxable service is declared by the central government. If any service is not fall under taxable service then we could not charge service tax on the category. The Central Board of Excise and Customs (CBEC) collect the service tax which is charged only on taxable services. Service tax is applicable whole of India but except of Jammu and Kashmir.

Important Points of Service Tax:

All services are not taxable.
Service tax charge only on taxable services.
Service tax in an indirect tax.
Service tax payable only on receipt basis.
Service provided by a person is termed as his output service. Similarly any service availed by the person is his input service.
Current rate of service tax is 12.36% (12% charge on bill value, 2% on tax and 1% on previous value)

How to Enable Service Tax in Tally:

Press- F11 > Statutory & Taxation (F3) >
Service tax applicable – Yes.
Set/alter service tax detail – Yes.
Give here service tax registration number, date of registration, and other detail.

Major Service category name – Normally sales service of the company is called major service. In other words major service means primary service of the organizations. You may select not applicable if the organization does not fall in any of the category list.

1.   20% Credit adjustment – Select 20% credit adjustment when purchase service of the company in not related (directly) in the sales service. In other words Purchase service or sales service belong indirect.
2.   100% Credit adjustment – Select 100% credit adjustment when purchase Service of the company is directly related to sales service of the company.
3.  Focal Bank – focal bank mean where you deposited service tax. Focal bank are nominated bank to receive service tax for specific area. Each bank allotted a bank code.
Save the above information.

Create following Ledger accounts:

1.   Sales service
Under – Sales a/c
Is Service tax applicable – yes
Select sales service (Which is select in F11).
2.   Party A/c.
Under – Sundry Debtor
Service tax applicable – yes
3.   Service tax on sales service
Under – Duties & tax
Select Service tax with category of service tax.
4.   Purchase Service
Under – Purchase A/c
Is service tax applicable – yes
(Select Purchase service category)
5.   Party A/c.
Under – sundry creditor
Is service tax applicable – yes
6.   Service tax on purchase service.
Under – duties & taxes
Select service tax with category of purchase service.
7.   Service Tax payable
Under – current liabilities
NOTE – No requirement to create Service tax refundable ledger.
Entry –After Creation of ledger go in the purchase/ sales voucher. Press :
Alt + I (For Accounting Invoice).
Pass the transaction.

NOTE – After Purchase or sales transaction if you want to see report then there is no result display because service tax is based on payment or receipt. Pass the payment to party (sundry creditor) in payment voucher or receipt entry from debtor in receipt voucher. After payment or receipt you will see the report of service tax in tally.

How to View / Print Report –

Got  > Display > Statutory Report > Service Tax Report > Service Tax Payable/ Input Credit report.

Adjustment entry in case of 100% credit adjustment in journal voucher.

Service tax on sales service a/c………………….  Dr
To service tax on purchase service
To Service tax payable

Adjustment entry in case of 20% credit adjustment in journal voucher

Service tax on sales service……………………..Dr
To service tax on purchase service
To service tax payable

NOTE – In case of 20% adjustment you just fill up only 20% of output service tax (Mean service tax on sales service) amount in Service tax on purchase service ( mean Input service) column.

After fill up 20 % amount, the remain the amount of purchase service (means Input Service Tax) is transfer to P & L A/c or Suspense A/c. The adjustment entry is following.

Profit & loss a/c…………………Dr
To service tax on purchase service.

Must Read: TCS-Tax Collected At Source in Tally

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