Service Tax Expenses

[Indrajit Mondal]

Dear Sir,

I have check a company A/c and they passed a entry on Service Tax on GTA like

1) Freight/Transportation Charges Dr. (under P/L A/c)

Service Tax Espenses A/c Dr. (under P/L A/c)

Service tax on GTA under RCM Cr. (under Liabilities)

Party A/c Cr. (under Liabilities)

Now my question how Service Tax Expenses will create instead of Deferred Service Tax Input A/c is the entry is correct..

Please reply...

[Ganeshan Kalyani]

If the credit is eligible then service tax receivable account should be debited. Otherwise service tax expense account is correct. Thanks

AI Summary

Service tax credit eligibility determines whether the tax is recorded as a receivable or as an expense under reverse charge.
Where service tax credit is available for GTA services treated under the reverse charge mechanism, debit Service Tax Receivable (deferred/input) account; if credit is not available, charge the amount to Service Tax Expense. The appropriate accounting treatment depends solely on eligibility to claim input credit.