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Basics of Service Tax in TallyERP9 : LAB Practice

Let us understand the following definitions and terminologies used in Service Tax :

 

Features of service tax

  • Service tax is payable on gross amount charged for service provided or to be provided, excluding material cost. Tax is also payable on reimbursement of expenses which form part of service. However, payments made by service provider as 'pure agent' of service receiver is kept outside the purview of Service Tax.
  • In cases, where the value of Service provided is not ascertainable the valuation is done on the basis of similar service or on basis of cost.
  • Gross amount charged is considered as inclusive of service tax and then tax is back calcu- lated.
  • Service tax is payable only when bill amount is received from service receiver. However, in case of service provided to associated enterprises, service tax is payable on booking such entry

Taxable Service

 

Service tax is payable on 'taxable service'. The definition of taxable service is different for each class of services, e.g. in case of advertising agency, any service provided to a client, by an adver- tising agency in relation to advertisement, in any manner will be 'taxable service'.

 

 

Value of Taxable Service

 

Service tax is payable on 'value of services'. Value of Service shall be the gross amount charged by the service provider for such service rendered by him.

 

 

Service Provider

As defined u/s 65(105) a service provider is one who provides taxable service.

 

 

Person liable to pay service tax

 

Every person providing taxable service to any person has to pay service tax at the prescribed rates. In few cases, tax is payable by service receiver, under reverse charge method.

 

 

Exemption from service tax

  • Small service providers whose total value of services provided (including exempt and non-   taxable services) is less than Rs 10 lakhs in previous year are not required to pay service    tax in current financial year till they reach turnover of Rs 10 lakhs.
  • Services provided to SEZ units or developer for consumption within SEZ are exempt.
  • Refund is eligible for specified services utilised for export.
  • Services provided by RBI are exempt but service provided to RBI are not exempt.

 

Rate of Service Tax

 

According to Section 66 of Finance Act, 1994 there shall be levied a tax at the rate of 10% of value of taxable services referred in section 65(105) of Finance Act, 1994. In addition, education cess @ 2% and Secondary Higher Education cess @ 1% is payable. Thus, total service tax is

10.3%.

 

Let us consider the following example to understand how Service Tax is calculated :

 

 

Particulars

Rs.

a.

Charge on service (i.e. Bill amount)

10,000

b.

Service Tax @ 10%

1,000

c.

Cess on Service Tax @ 2%

20

d.

Sec Cess on Service Tax @ 1%

10

 

Total invoice amount

11,030

 

Assuming the buyer pays the seller only Rs. 5,000 the Service Tax payable is calculated as below:

 

 

Particulars

Rs.

a.

Charge paid on service              (10,000 x 5,000)/11,030

4,533

b.

Service Tax on Rs.5000/- is        (1,000 x 5,000)/11,030

453

c.

Cess on Service Tax is               (20 x 5,000)/11,030

9

d.

Sec Cess on Service Tax is               (10 x 5,000)/11,030

5

 

Total Payment Received

5,000.00

 

 

Abatements

 

Abatement refers to the percentage of tax exemption provided by the government on the value to be considered for calculation of Service Tax. It is either a percentage of the service charges or a lump sum amount.

 

 

 

 

Particulars

Rs.

a.

Charge on Service

10,000

b.

An abatement of 30% amounts to:

3,000

c.

Here, the assessable value is (a-b)

7,000

 

Therefore, Service Tax @ 10% on Rs. 7,000, Cess @

2% and Sec Cess @ 1% on Service Tax

 

 

 

Cenvat Credit

 

Service provider can avail Cenvat credit of service tax paid on input services and excise duty paid on  inputs  and capital goods. The credit can be utilised for payment of service tax on output services. However, in cases where the assessee is providing both taxable and exempt services and if input services are common, Cenvat credit can either be taken on proportionate basis or 8% 'amount' is required to be paid on exempted services.

 

 

Payment of Service Tax

 

when the assessee is a corporate, service tax is payable on a monthly basis by the 5th of the following  month. For example, service tax has to be paid by January 5, for the month of December.

 

Non-corporate bodies such as individuals, proprietary firms and partnership firms pay service tax for the  fiscal quarter. The payment is to be made by the 5th day of the month, following the quarter. For example, service tax for the quarter ending June 30, is to be paid by July 5th. For the month of March  though, corporate and non-corporate bodies, have to pay the service tax by March 31.

 

The service tax assessee must use a GAR 7 Challan to pay tax in the bank nominated by the commissionerate. The payment must be rounded off to the nearest rupee. It is advisable to use separate GAR 7 Challans for different categories of service.

Salient Features of Service Tax compliant Tally.ERP 9

 

  • Tally.ERP 9 tracks the details bill-wise and automatically calculates the Service Tax paya- ble and Input Credit on each bill while offering the flexibility to make adjustments later.
  • It has a built-in assessable value feature on which Service Tax is calculated. It also accounts for abatement and expenses.
  • It maintains information on Service Tax category-wise which is mandatory for filing the Service Tax returns.
  • It also makes a provision for exemption notification details.
  • Eliminates error-prone information, incorrect remittances.
  • It generates reports in the government suggested formats like GAR-7 Challans, ST3 Report, Management Information Services (MIS) reports and Service Tax Payable Reports. Create a company called NeXT Services to understand the Service Tax feature of Tally.ERP 9
 
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1- Basics of Service Tax in TallyERP9 : LAB Practice

 

2- Company Setup for Service Tax in TallyERP9 : LAB Practice

 
3- Enabling Service Tax in TallyERP9 : LAB Practice

In the F11: Features (Statutory & Taxation Features),

 

  • Set Enable Service Tax to Yes.
  • Enable Set/Alter Service Tax Details to Yes
 

4- Service Tax Statutory Masters in TallyERP9 : LAB Practice

Before creating masters, the following Statutory Master is loaded into Tally.ERP 9. To view the Service Category,

 

Go to Gateway of Tally > Display > Statutory Info. > Service Categories > Advertising Agency

Let us create the following ledger masters related to Service Tax :

  • Sundry Creditors
  • Sundry Debtors
  • Duties and Taxes
  • Sales Accounts
  • Purchase Accounts
 

5- Create Sundry Creditor Ledger for Service Tax in TallyERP9 : LAB Practice

 

6- Create Sundry Debtor Ledger for Service Tax in TallyERP9 : LAB Practice

 

7- Creating Service Tax Ledger in TallyERP9 : LAB Practice

 

8- Create Sales Ledger for Services in TallyERP9 : LAB Practice

 

9- Create Purchase Ledger for Services in TallyERP9 : LAB Practice

 

10- Creating Purchase Invoice for Services Tax in TallyERP9 : LAB Practice

On 15-4-2015, NeXT Services received Professional Services from Shweta Agencies worth Rs. 1,75,000. The payment for the services was made on 16-4-2015

 

11- Creating Sales Invoice for Services Tax in TallyERP9 : LAB Practice

On 20-4-2015,  Consultancy  Services  worth  Rs.  7,00,000  was  provided  to  Swayam Systems and the amount was received on 25-4-2015.
 

12- Accounting for Advance Receipts for Services Tax in TallyERP9 : LAB Practice

As mentioned earlier, Service tax is not applicable on the receipt of advance for a service until the invoice is raised. Service tax is to be paid on the amount received on the invoice value including the advance received.

On 27-4-2015, NeXT Services receives an advance of Rs. 70,000 for a service rendered by it from Indian Business House as on 29-4-2015.

On 29-4-2015, NeXT Services, completed the contract and raised an invoice on Indian Business   House  towards  Advertising  Agency  Services  with  10%  Service  Tax,  2% Education Cess and 1% Secondary Education Cess for a total amount of Rs 1,70,000 of which Rs 70,000 was received as an advance. Service tax, Education Cess and Secondary Cess is calculated on the total assessable value of Rs. 1,70,000.
 

13- Accounting for Opening Service Tax Credit in TallyERP9 : LAB Practice

The pending Service Tax payables and available Input Credit on Service Tax can be transferred from the previous financial year to the current financial year in Tally.ERP 9.

On 30-4-2015, NeXT Services decided to pay Service Tax to the government.  Information pertaining to the Previous year is given below:

  • Input Service Tax Credit for Rs. 1,030 on 10,000 bill value
Service Tax payable of Rs. 2,060 on 20,000 bill value
 

14- Payment of Service Tax in TallyERP9 : LAB Practice

On 05-5-2015, NeXT Services, paid Service Tax of Rs. 5506.72 towards Advertising Agency Services, vide cheque no. 551899 after adjusting Input Service Tax Credit on Telephone Services
 

15- Service Tax Reports in TallyERP9 : LAB Practice

Service Tax reports are the reports which is used to view all the Service Tax related details at one place. The reports available in the menu are:

  1. Service Tax Payables
  2. Input Credit Form
  3. ST3 Report

Go to Gateway of Tally > Display > Statutory Reports

 
 
Company Information @ Tally.ERP9
Group & Ledger

Introduction
1. THE GROUP
2. THE LEDGER
3. VOUCHERS TYPES

Advanced Inventory / Stock
Meaning
Order Processing
Re-Order Levels
Tracking Numbers
Batch-wise Details
Additional Cost Details
Bill of Materials (BOM)
Price Lists and Price Levels
Stock Valuation
Zero Valued Entries
Inventory Ageing Report
Actual and Billed Quantities
Advanced Usage of Vouchers
Maintain Bill-wise Details
Cost Center and Cost Category
Interest Calculation
Reversing Journals
Post-Dated Voucher
Memo (Memorandum) Voucher
Optional Voucher
Using Tracking Number
 
Statutory & Taxation
Utilities & Others @ Tally.ERP9
Credit Limits
Knowledge Base @ Tally.ERP9
Stock Items
Stock Groups
Inventory Masters
Inventory Vouchers
Inventory Report Statements
Balance Sheet
Accounting Reports
Accounting Vouchers
Interest Calculation
VAT-Value Added Tax
Service Tax
TDS (Tax Deducted at Source)
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The names of Companies and persons used in this Website have been used for illustrative purposes only.
The visitors may visit www.tallysolutions.com , the web site of Tally Solutions Pvt. Ltd. for resolving their doubts or for clarifications

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