The amount refunded for not providing of the service for which service tax was paid on receipt of such money can be adjusted against the liability of the subsequent period under rule 6(3). This adjustment entry can be recorded in Journal using the Voucher Class by selecting Tax Paid but service not rendered Rule 6(3) Adjustment.
Example:On 27-9-2012 ABC company received Advance of Rs. 50,000 from CreativeIn Ad Agency towards the Event Management Services to be provided.
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On 28-9-2012 Paid the Service Tax on the advance received to the Government.
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On 29-9-2012 CreativeIn Ad agency cancelled the Services and ABC company paid the Advance received Rs. 50000 (including the Service Tax paid to the Government)
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On 30-9-2012 ABC Company adjusted the service tax paid (ST - Rs. 4533, Education Cess Rs. 91, SHE cess Rs. 45) on the services cancelled towards the tax Liability.
To account the above transaction
1. Record the Receipt Voucher (to account advance received)
2. Record the Payment Voucher (to account tax payment to government)
3. Record the Journal Voucher (To account Service tax portion paid to the government)
4. Record Payment Voucher (To pay the balance to the party)
5. Record the Journal Voucher (To account adjust the tax paid on the cancelled services towards the tax liability)
Go to Gateway of Tally > Accounting Vouchers > F6: Receipt
In Account field select Canara Bank
Select CreativeIn Ad Agency under Particulars
In Service Tax Details screen select Type of Ref as Advance, Name and Type of Service will be defaulted. In Category field select Event Management Services and in Service Amount specify Rs. 50000. Tax will be calculated and displayed.
In Bill-wise Details select the Type of Ref as Advance and specify the bill Name as ADV -002
Select Service tax and Cess Ledgers.
Press Enter to Accept
Go to Gateway of Tally > Accounting Vouchers > F5: Payment
In Account field select Canara Bank
Under Particulars select service Tax ledger -Service Tax @ 12%
ย In Service Tax Details screen, select Agst Ref in Type of Ref field. In Name field select Rcpt/5-1 dated 27-9-2012. based on the bill selected Category and Amount will be defaulted.
Under Particulars select Education Cess Ledger - Education Cess @ 2%
ย In Service Tax Details screen, select Agst Ref in Type of Ref field. In Name field select Rcpt/5-1 dated 27-9-2012. based on the bill selected Category and Amount will be defaulted.
Similarly select Secondary education Cess ledger and select the tax bill Rcpt/5-1 dated 27-9-2012
In Service Tax Payment Details screen provide the service tax payments details.
Press Enter to Accept
Service Tax portion on the advance received is paid to government. On cancellation of service contract, service tax amount already paid to the government is also returned to the party. To account such portion of tax paid to the government and adjust towards the mount payable to the party record a adjustment entry in Journal Voucher
To account the account the tax already paid a control account is created under Suspense A/c.
Go to Gateway of Tally > Accounting Vouchers > F7: Journal
In Debit field select the control account created to account the tax already paid - Service Tax Paid to Government and mention Rs. 5,500.18 in Amount field.
In Credit field select the party ledger - CreativeIn Ad Agency. Amount will be defaulted to Rs. 5,500.18
In Bill-wise Details screen, select the Type of Ref as New Ref and reference Name as ADJ 01
Press Enter to Accept
Go to Gateway of Tally > Accounting Vouchers > F5: Payment
In Account field select Canara Bank
Under Particulars select CreativeIn Ad Agency. In Service Tax Details screen in Type of Ref field select Agst Ref and select the bills ADV-002 and ADJ 01
In Amount field will automatically display Rs. 50,000
Press Enter to Accept
Go to Gateway of Tally > Accounting Vouchers > F7: Journal
In Change Voucher Type screen select Service Tax Adjustments in Class field
In Used for field select Tax Paid But Service Not Rendered Rule 6(3) Adjustment from Service Tax Adjustments list
In Debit field select service tax ledger - Service Tax @ 12%
In Service Tax Details screen
In Type of Ref select Agst Ref
In Name field select the tax bill Sale/13-1. Category and amount will be defaulted based on the bill selected
In Amount field Rs. 5399.98 is defaulted
Note: In this case, ย the tax paid on services sold (Sale/13-1) is equal to tax paid on services not rendered.
In Debit field select Education Cess @ 2% and in Service Tax Details screen select the tax bill Sale/13-1, the Amount Rs. 106.80 is defaulted
In Debit field select Secondary Education Cess @ 1% and in Service Tax Details screen select the tax bill Sale/13-1, the Amount Rs. 53.40 is defaulted
In Credit field select the control ledger used to adjust service tax paid - Service Tax Paid to Government. Amount Rs. 5500.18 will be displayed automatically.
Enable the option Provide Details to Yes to enter the Service Tax Payment Details
Press Enter to Accept
Note: The values of Tax adjusted under Rule 6(3) will be captured in section (4A) (I) (a) (iii)
'Accounting Adjustments under Rule 6(3)' has been shared with