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Using Nature of Adjustments in Service Tax

In service tax, the nature of adjustments are provided for various adjustment transactions involving service tax payable or service tax input credit, as required by the department. These help in capturing the value for each nature of adjustment in respective fields of Form ST3.

To use service tax nature of adjustment

1. Go to Gateway of Tally > Accounting Vouchers > F7: Journal .

2. Click J : Stat Adjustment .

3. Select Service Tax in Type of duty/tax to display the Nature of Adjustment .

4. Select the required unit in Tax Unit field. This field is enabled only when multi-unit is enabled, and created for service tax.

5. Press Enter to save.

Note: By default, only the basic nature of adjustments are displayed. Enable the option Allow All Adjustment Types? using F12: Configure in Stat Adjustment Details screen to display the entire set of service tax nature of adjustments.

Sl. No.

Service Tax - Adjustments in Release 5.x

Service Tax - Adjustments in Release 4.9x

Purpose and Transaction

1

Adjustment Against Exempted Service Or Goods Received

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As per Rules 6(3) of CENVAT Credit Rules, 2004, in case if assessee is engaged in providing taxable & exempted service or manufacturing dutiable or exempted goods and opts to pay a % of amount prescribed by the department on value of Exempted goods and services. In such case available input credit can be adjusted against amount payable (7% of service/manufactured goods value)to department.

In the journal transaction select Adjustment Against Exempted Service Or Goods Received nature of adjustment and,

Dr. Amount payable on e xempted service (7%) ledger (create under Indirect Expenses )

Cr. Service Tax Input Credit ledger (created under Duties & Taxes/Current Assets )

2

Advance Tax Paid Rule 6(1A) Adjustment

Advance Tax Paid Rule 6(1A) Adjustment

Select this nature of adjustment to adjust service tax payable against advance tax paid.

In the journal transaction select Advance Tax Paid Rule 6(1A) Adjustment nature of adjustment and,

Dr. Service Tax Payable ledger

Dr. Swachh Bharat cess payable ledger

Dr. Krishi Kalyan cess payable ledger

Cr. Advance service tax Paid ledger (ledger created under Current Asset / Duties & Taxes )

Cr. Advance Swachh Bharat cess paid ledger

Cr. Advance Krishi Kalyan cess paid ledger

3

Availing Input Credit

Availing Input Credit

Select this nature of adjustment to avail service tax credit for services purchased when tax ledger is not selected in purchase transaction.

In the journal transaction select Availing Input Credit nature of adjustment and,

Dr. Service Tax Input Credit ledger

Dr. Krishi Kalyan cess ledger

Cr. Supplier (supplier from whom services were received)/Branch/Cash/Bank ledger

4

Book Adjustment In Case of Government Department

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This is meant for those Central Govt. departments who are liable to pay service tax for the services provided by them but the payment of the same is effected by way of adjustment of entries and not by cash.

In the journal transaction select Book Adjustment In Case of Government Department nature of adjustment and,

Dr. Service Tax Payable ledger

Dr. Swachh Bharat cess payable ledger

Dr. Krishi Kalyan cess payable ledger

Cr. Branch/division/party ledger

5

CENVAT Credit Used for Service Tax Payable (Capital Goods)

CENVAT Adjustment

Select this nature of adjustment to adjust CENVAT credit available on purchase of excisable capital goods (that are used for rendering taxable services) against service tax payable.

In the journal transaction select CENVAT Credit Used for Service Tax Payable (Capital Goods) nature of adjustment and,

Dr. Service Tax Payable ledger

Cr. CENVAT ledger (created under Duties & Taxes with CENVAT as Type of duty/tax )

6

CENVAT Credit Used for Service Tax Payable (On Inputs)

Select this nature of adjustment to adjust CENVAT credit availed on purchase of excisable raw material against service tax payable.

In the journal transaction select CENVAT Credit Used for Service Tax Payable (On Inputs) nature of adjustment and,

Dr. Service Tax Payable ledger

Cr. CENVAT ledger (created under Duties & Taxes with CENVAT as Type of duty/tax )

7

Credit Received From ISD

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Select this nature of adjustment when credit is received from input service distributor as part of credit distribution.

In the journal transaction select Credit Received From ISD nature of adjustment and,

Dr. Service Tax Input Credit ledger (created under Duties & Taxes / Current Assets )

Dr. Krishi Kalyan cess ledger

Cr. Branch or Division ledger or Current assets ledger

8

Excess Service Tax Paid earlier Rule 6(4A) Adjustment

Excess Service Tax Paid Earlier Rule 6(4A) Adjustment

Select this nature of adjustment when the service tax payable is adjusted against excess service tax paid earlier.

In the journal transaction select Excess Service Tax Paid earlier Rule 6(4A) Adjustment nature of adjustment and,

Dr. Service Tax Payable ledger

Dr. Swachh Bharat cess payable ledger

Dr. Krishi Kalyan cess payable ledger

Cr. Excess service tax Paid ledger (ledger created under Current Asset / Duties & Taxes )

Cr. Excess Swachh Bharat cess paid ledger

Cr. Excess Krishi Kalyan cess paid ledger

9

Excess Tax Amount Paid Earlier Under Rule 6(4C) Adjustment

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Select this nature of adjustment to adjust service tax payable against excess tax paid.

In the journal transaction select Excess Tax Amount Paid Earlier Under Rule 6(4C) Adjustment nature of adjustment and,

Dr. Service Tax Payable ledger

Dr. Swachh Bharat cess payable ledger

Dr. Krishi Kalyan cess payable ledger

Cr. Service tax Paid ledger (ledger created under Current Asset / Duties & Taxes )

Cr. Swachh Bharat cess paid ledger

Cr. Krishi Kalyan cess paid ledger

or

Dr. Service Tax Payable ledger

Cr. Service tax Paid ledger (ledger created under Current Asset / Duties & Taxes )

or

Dr. Swachh Bharat cess payable ledger

Cr. Swachh Bharat cess paid ledger

or

Dr. Krishi Kalyan cess payable ledger

Cr. Krishi Kalyan cess paid ledger

10

Input Credit Adjustment Arrears

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Select this nature of adjustment when the service tax payable is adjusted against available credit after the due date.

In the journal transaction select Input Credit Adjustment Arrears nature of adjustment and,

Dr. Service Tax Payable ledger

Dr. Krishi Kalyan cess payable ledger

Cr. Service Tax Input Credit ledger (created under Duties & Taxes / Current Assets )

Cr. Excess Krishi Kalyan cess input credit ledger

11

Input Credit Adjustments

Input Credit Adjustments

Select this nature of adjustment when the service tax payable is adjusted against the available input credit.

In the journal transaction select Input Credit Adjustments nature of adjustment and,

Dr. Service Tax Payable ledger

Dr. Krishi Kalyan cess payable ledger

Cr. Service Tax Input Credit ledger (created under Duties & Taxes / Current Assets )

Cr. Excess Krishi Kalyan cess input credit ledger

12

Money Equivalent of Consideration

Money Equivalent of Consideration

Any consideration (something in return) received towards services provided or paid towards services received via other than money is called Money Equivalent of Consideration .

Select this nature of adjustment when journal adjustment is recorded for adjusting money receivable for services rendered against other services/goods received.

In the journal transaction select Money Equivalent of Consideration nature of adjustment and,

Dr. Customer/Supplier (Services rendered/received)

Cr. Supplier / Customer (Services received/ rendered)

13

Opening Balance

Opening Balance

Select the nature of adjustment Opening Balance to bring in the service tax input credit or service tax liability (as provider/ as receiver)

To bring service tax input credit, in the journal transaction select Opening Balance nature of adjustment and,

Dr. Service Tax Input Credit ledger (created under Duties & Taxes / Current Assets )

Dr. Krishi Kalyan cess ledger

Cr. Suspense A/c (created under the group Suspense A/c )

To bring in service tax liability (provider’s liability / recipient liability),

Dr. Suspense A/c

Cr. Service Tax Payable ledger (created under Duties & Taxes / Current Liabilities )

Cr. Swachh Bharat cess ledger

Cr. Krishi Kalyan cess ledger

14

Other Adjustments

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Select this nature of adjustment when the other amount payable to department is adjusted against service tax input credit.

In journal transaction select Other Adjustments nature of adjustment and,

Dr. Service tax or any expense ledger

Cr. Service Tax Input Credit ledger (created under Duties & Taxes / Current Assets )

15

Refund of Service Tax Input Credit

Refund of Service Tax Input Credit

When assessee receives refund (for unutilised input credit) from the department, the same can recorded using this nature of adjustment.

In the journal transaction select Refund of Service Tax Input Credit

Dr. Cash ledger

Cr. Service Tax Input Credit ledger (created under Duties & Taxes / Current Assets )

Cr. Krishi Kalyan cess ledger

16

Reversal Of Ineligible Credit

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Select this nature of adjustment when assessee want to reverse the availed input service tax credit, incase it is ineligible.

In the journal transaction select Reversal Of Ineligible Credit

Dr. E xpense ledger (created under Indirect Expenses )

Cr. Service Tax Input Credit ledger (created under Duties & Taxes / Current Assets )

Cr. Krishi Kalyan cess ledger

17

Reversal of Utilised Input Credit

Reversal of Utilised Input Credit

As per Amendment in the CENVAT Credit (Third Amendment) Rules, 2011 service tax input credit against the purchase bills can be availed even if the payment is not made to the service provider. However if the payment is not made to the service provider within 3 months then, the Service tax credit utilised has to be reversed.

Select this nature of adjustment to reverse such input credit utilised.

In the journal transaction select Reversal of Utilised Input Credit nature of adjustment and,

Dr. Service Tax Input Credit ledger (created under Duties & Taxes / Current Assets )

Dr. Krishi Kalyan cess ledger

Cr. Service Tax Payable ledger

Cr. Krishi Kalyan cess ledger

18

Service Tax Credit Used For Excise Duty Payable

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Select this nature of adjustment when excise duty payable is adjusted against service tax input credit.

In the journal transaction select Service Tax Credit Used For Excise Duty Payable nature of adjustment and,

Dr. Excise Duty ledger

Cr. Service Tax Input Credit (created under Duties & Taxes / Current Assets )

19

Service Tax Credit Used For Excise Duty Payable (Removal As Such)

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Select this nature of adjustment when excise duty payable on Removal As Such is adjusted against service tax input credit.

In the journal transaction select Service Tax Credit Used For Excise Duty Payable nature of adjustment and,

Dr. Excise Duty ledger (duty payable on Removal As Such)

Cr. Service Tax Input Credit ledger (created under Duties & Taxes / Current Assets )

20

Tax on Import of Service

Tax on Import of Service

Select this nature of adjustment to create service tax liability as a recipient of service for services imported.

In the journal transaction select Tax on Import of Service nature of adjustment and,

Dr. Expense ledger (created under Indirect Expenses )/service tax ledgers

Cr. Service Tax Payable ledger

Cr. Swachh Bharat cess ledger

Cr. Krishi Kalyan cess ledger

Note: Transaction recorded using this nature of adjustment will affect the books, but have no implication in Service Tax Liability part in triangulation.

21

Tax on Reverse Charge

Tax on Reverse Charge

Select this nature of adjustment to create service tax liability as a receiver of services eligible for reverse charge.

In the journal transaction select Tax on Reverse Charge nature of adjustment and,

Dr. Expense ledger (created under Indirect Expenses )/service tax ledgers

Cr. Service Tax Payable ledger

Cr. Swachh Bharat cess ledger

Cr. Krishi Kalyan cess ledger

Note: Transaction recorded using this nature of adjustment will affect the books, but  have no implication in Service Tax Liability part in triangulation.

22

Tax on Service Received

Tax on Service Received

Select this nature of adjustment to create service tax liability as recipient of services from the state of Jammu & Kashmir.

In the journal transaction select Tax on Service Received nature of adjustment and,

Dr. Expense ledger (created under Indirect Expenses )/service tax ledgers

Cr. Service Tax Payable ledger

Cr. Swachh Bharat cess ledger

Cr. Krishi Kalyan cess ledger

Note: Transaction recorded using this nature of adjustment will affect the books, but  have no implication in Service Tax Liability part in triangulation.

23

Tax Paid but service not rendered Rule 6(3) Adjustment

Tax Paid But Service Not Rendered Rule 6(3) Adjustment

Select this nature of adjustment when the amount refundable for not providing the service, for which, service tax was paid on advance received from customer is adjusted against the liability of the subsequent period under rule 6(3). i.e., tax paid on advance received from service receiver, when service is cancelled after paying the tax to the department, such advance tax can be adjusted against further tax liability.

In the journal transaction select Tax Paid but service not rendered Rule 6(3) Adjustment nature of adjustment and,

Dr. Service Tax Payable ledger

Dr. Swachh Bharat cess ledger

Dr. Krishi Kalyan cess ledger

Cr. Service Tax Input Credit ledger  (created under Duties & Taxes / Current Assets )

Cr. Swachh Bharat cess ledger

Cr. Krishi Kalyan cess ledger

24

Ineligible ISD Credit

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Select this nature of adjustment when input service distributor is transferring the credit to exempted unit as part of ISD credit distribution.

In the journal transaction select Ineligible ISD Credit nature of adjustment and,

Dr. Expense ledger

Cr. Service Tax Input Credit ledger (created under Duties & Taxes / Current Assets )

Cr. Krishi Kalyan cess ledger

Note: The nature of adjustments related to Input Service Distribution are available only on enabling ISD .

25

ISD Credit Distribution

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Select this nature of adjustment when input service distributor distributes the CENVAT credit with respect to service tax paid on the input service to units providing output service.

In the journal transaction select ISD Credit Distribution nature of adjustment and,

Dr. Unit to which the credit is transferred/Tax Credit ledger

Cr. Service Tax Input Credit ledger (created under Duties & Taxes / Current Assets )

Cr. Krishi Kalyan cess ledger

Note: The nature of adjustments related to Input Service Distribution are available only on enabling ISD .

26

ISD Credit Distribution - Excise Unit

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Select this nature of adjustment, when input service distributor distributes the CENVAT credit with respect to service tax paid on the input service to its manufacturing units.

In the journal transaction select ISD Credit Distribution nature of adjustment and,

Dr. Unit to which the credit is transferred/Tax Credit ledger

Cr. Service Tax Input Credit ledger (created under Duties & Taxes / Current Assets )

Note: The nature of adjustments related to Input Service Distribution are available only on enabling ISD .

27

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Service Consideration Adjustments

You can knock-off the bill using bill-wise details and treat the bill as realised. Hence, nature of adjustment is not provided.