As per Service Tax rules, Import of services means any services provided from outside India and received in India. Tax on such services is known as tax on Import of Services and service receiver is liable to pay service tax on Import of Services.
The service tax paid on imports cannot be considered for availing the Input Credit because, Rule 5 of section 66A provides that the service tax liability created against the imported services cannot be treated as Output Services for the purpose of availing credit of tax or duty paid on inputs/input services. Further the Credit available cannot be used for payment of service tax liability created towards Imports.
Note: In some Cases, assessee may be allowed to avail the Input Credit on the Tax paid on the Import of Services.
Tally.ERP 9 allows you to record import of services and calculate the Service Tax. To account the Service Tax on imports - Tax on Import of Service is provided in Journal Voucher
Example: On 23-7-2012 ABC Company imported Architect services for Rs.5,00,000 from Incolor Architects. ABC company is liable to pay Service Tax on imported services.
On 24-7-2012 ABC Company paid Rs. 5,00,000 to Incolor Architects and raised Service Tax Liability towards import of services
To account the above transaction
1. Create Service Provider Ledger
2. Create Purchase Ledger
3. Record the transaction in Purchase Voucher (to account Imports)
4. Record Payment Voucher (to account payments to party)
5. Record a Journal Voucher (to raise service tax liability)
Go to Gateway of Tally > Accounts Info. > Ledgers > Create
In the Ledger Creation screen:
Enter the Name of the Party Ledger e.g. Incolor Architects
Select Sundry Creditors from the List of Groups in the Under field
Set Maintain balances bill-by-bill to Yes
Enter the Default Credit Period, if required
Set Is Service Provider/Receiver to Yes
Set the option Set/Alter Service Tax Details to Yes and press enter to view Service Tax Details screen
In Service Tax Details screen enter
Registration Number and Date of Registration are not required to capture as we are importing the services
Type of Classification: In this field select Import from the list of Classifications.
Notification No.: In this field enter the notification no under which the services are imported.
Note:Select the option Import when the services are Imported.
Enter the Mailing Details and Tax Information
Press Enter to Accept and save.
To create purchase ledger - Import - Architect Services refer the topic Service Purchase Ledger
Note: Select the Architects Services as Default Service Category.
Go to Gateway of Tally > Accounting Vouchers > F9: Purchase
In Accounting Voucher Creation screen, press Alt+I or click on I : Account Invoice if the voucher is in Item invoice mode
Press F2 and change the date to 23-07-2012
In Party’s A/c Name field select the service provider e.g. Incolor Architects
Under Particulars select the Service (purchases) Ledger e.g. Import - Architect Services and press enter to view Service Tax Details screen
In Service Tax Details screen
Type of Ref.: Select New Ref from the method of Adjustment.
Name: This field displays the Reference Number - Purc/6-1 for the service tax calculation.
Note: If the invoice no is mentioned in the Supplier Invoice No. field, then Tally.ERP 9 captures invoice number instead of voucher number in Reference Number displayed in Name field.
Type of Service: Based on the Type of Classification selected in the Service Provider, Type of Service will be defaulted (displayed). By default Import is displayed and Tally.ERP 9 skips the field.
Note: The default Type of service can be overridden. Press Back Space key to move to Type of Service field and select the applicable Type of service. The type of service selected in the voucher entry will determine the Type of service.
Category: Based on the service Category selected in the Purchase Ledger, category will be defaulted (displayed). By default Taxable Service is displayed and Tally.ERP 9 skips the field.
Service Amount: In this field enter the Service Amount of Rs. 5,00,000
Amount (Incl. of Tax): The amount specified in the Service Amount field will be taken as Amount inclusive of tax as on imports the service tax liability is on the service receiver and not on the provider. So service Tax will not get calculated.
In Amount field the service amount of Rs. 5,00,000 will be displayed
Note: In case of Imports, Service Tax ledgers are not selected as Tax is not accounted during booking the purchases.
In Bill-wise Details screen, select the Reference as New Ref and enter the bill Name as IA/6254/12-13
The completed Purchase Voucher is displayed as shown:
Press Enter to save and Accept.
Go to Gateway of Tally > Accounting Vouchers > F5: Payment
Press F2 and change the date to 24-07-2012
In Debit field select Incolor Architects ledger and press enter to view Service Tax Details screen
In Service Tax Details screen
In Type of Ref field select Agst Ref
In Name field select Purc/6-1 to adjust the Pending Tax Bills
Based on the tax bill selected Type of Ref, Category, Amount (Incl. of Tax) and Service Amount will be defaulted.
In Bill-wise Details screen
In Type of Ref field select Agst Ref
In Name field select IA/6254/12-13 to adjust the pending bill against the payment
Rs. 5,00,000 will be defaulted in Amount field
In Credit field select Canara Bank
The completed Payment Voucher is displayed as shown:
Press Enter to save and Accept
The liability to pay service tax on imports will arise only on making the payment to the service provider.
To account service tax on Imports, 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
In Change Voucher Type screen, in Class field select Service Tax Adjustments from Voucher Class list
Press F2 and change the date to 24-07-2012
In Used for field select Tax on Import of Service from the list of Service Tax Adjustments
Press Enter to view Tax on Purchases - Imports screen to calculate service tax liability
In Service Tax Liability screen
In Till Date select the Voucher date to account all the imports till the date of accounting the service tax liability. By default Voucher Date 24-7-2012 will be displayed.
In Service Category field select the service imported - Architect Service from the List of Service Categories
Note: You can select the option Any to consider all those service categories which are imported to compute the service tax liability.
Set the option Avail CENVAT Credit to No as ABC Company is not allowed to avail credit on tax paid on Imports.
In Party field select the party from services are imported - Incolor Architects from the list of Import Party's Ledger
Note: You can select the option Any to consider all those partys' from whom the services are imported to compute the service tax liability.
In Output Ledger section select
Service Tax Ledger @ 12% to account Service Tax
Education Cess @ 2% to account Education Cess
Secondary Education Cess @ 1% to account Secondary Education Cess
Note: In output Ledgers section service tax ledgers are selected to compute (calculate) the service tax liability on the services imported. It is mere computing what is the actual tax to be paid on the Imports.
In Input /Expense Ledgers section select
Select Tax on Imports ledger (created under indirect expenses)
Note: In Input/Expenses Ledgers section the Expense ledgers are selected to transfer the computed tax liability as expense.
In case, the assess is allowed to avail credit and has set the option Avail CENVAT Credit to Yes then the Tally.ERP 9 will display the list of service tax ledgers in Input /Expense Ledgers section to consider the tax paid on imports as Input Credit.
On accepting the Service Tax Liability screen, Tally.ERP 9 Auto fills the details in Journal Voucher
Press Enter to save and Accept.
