Service Tax Adjustment Flags

Adjustment Against Exempted Service Or Goods Received

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 flag and,

Dr Amount payable on exempted service (7%) ledger (create under Indirect Expenses)

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

Adjustment Against Municipal Tax Paid

Select this flag to adjust service tax payable against municipal tax paid.

In the journal transaction, select Adjustment Against Municipal Tax Paid flag and,

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

Cr Municipal Tax (expense ledger created under Indirect Expenses)

Advance Tax Paid Rule 6(1A) Adjustment

Select this flag to adjust service tax payable against advance tax paid.

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

Dr Service Tax Payable ledger

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

Availing Input Credit

Select this flag 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 flag and,

Dr Service Tax Input Credit ledger

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

Book Adjustment In Case of Government Department

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 flag and,

Dr Tax Payable ledger

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

CENVAT Credit Used for Service Tax Payable (Capital Goods)

Select this flag 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) flag and,

Dr Service Tax Payable ledger

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

CENVAT Credit Used for Service Tax Payable (On Inputs)

Select this flag 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) flag and,

Dr Service Tax Payable ledger

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

Credit Received From ISD

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

In the journal transaction select Credit Received From ISD flag and,

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

Cr Branch or Division ledger

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

Select this flag 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 flag and,

Dr Service Tax Payable ledger

Cr Excess Service Tax Paid  

Input Credit Adjustment Arrears

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

In the journal transaction select Input Credit Adjustment Arrears flag and,

Dr Service Tax Payable ledger

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

Input Credit Adjustments

Select this flag when the service tax payable is adjusted against the available input credit.

In the journal transaction select Input Credit Adjustments flag and,

Dr Service Tax Payable ledger

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

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 flag 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 flag and,

Dr Customer/Supplier (Services rendered/received)

Cr Supplier / Customer (Services received/ rendered)

Opening Balance

Select the flag 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 flag and,

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

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)

Other Adjustments

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

In journal transaction select Other Adjustments flag and,

Dr Payable ledger

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

Refund of Service Tax Input Credit

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

In the journal transaction select Refund of Service Tax Input Credit

Dr Cash/Bank ledger

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

Reversal Of Ineligible Credit

Select this flag 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 Expense ledger (created under Indirect Expenses)  

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

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 flag to reverse such input credit utilised.

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

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

Cr Service Tax Payable ledger

Service Tax Credit Used For Excise Duty Payable

Select this flag when excise duty payable is adjusted against service tax input credit.

In the journal transaction select Service Tax Credit Used For Excise Duty Payable flag and,

Dr Excise Duty ledger

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

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

Select this flag when excise duty payable on Removal As Such adjusted against service tax input credit.

In the journal transaction select Service Tax Credit Used For Excise Duty Payable flag and,

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

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

Tax on Import of Service

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

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

Dr expense ledger (created under Indirect Expenses)

Cr Service Tax Payable ledger

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

Tax on Reverse Charge

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

In the journal transaction select Tax on Reverse Charge flag and,

Dr expense ledger (created under Indirect Expenses)

Cr Service Tax Payable ledger

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

Tax on Service Received

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

In the journal transaction select Tax on Service Received flag and,

Dr expense ledger (created under Indirect Expenses)

Cr Service Tax Payable ledger

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

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

Select this flag 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 flag and,

Dr Service Tax Payable ledger

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

Ineligible ISD Credit

Select this flag 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 flag and,

Dr Expense ledger

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

Note: The flags related to Input Service Distribution are available only on enabling ISD.

ISD Credit Distribution

Select this flag 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 flag 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 flags related to Input Service Distribution are available only on enabling ISD.

ISD Credit Distribution - Excise Unit

Select this flag, when input service distributor distribute 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 flag 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 flags related to Input Service Distribution are available only on enabling ISD.