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How to set up service tax in tally erp9

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Today we will learn the service tax setup in Tally or service tax configuration in Tally.ERP 9 Release 5 and above versions.As the name suggests, it is a tax on the Services. It is a tax levied on the transaction of certain services specified by the Central Government under the Finance Act, 1994. There are about 119 taxable services comes under ambit.ST is applicable to all states except Jammu & Kashmir.

Service Tax Setup For Tally ERP 9 Release  4.93 & Below users

Service Tax rate

ItemRateWith effect from
Service Tax14 % 01-06-2015
Swachh Barat Cess0.5% 15-11-2015
Krishi Kalyan Cess0.5%01-06-2016
Total service tax collected from taxable services15 %01-06-2016

 Now ST is based on point of taxation rule, in simple language it is due at the time of generating invoice or at the time of receiving its consideration whichever is earlier.

Service Tax Payment Due Date

Service Tax collected paid to governments in the following manner

Individual,Sole trader& Partnership firm should pay quarterly

Tax PayerService tax Paid inDue date if Paid through bankDue date if paid through Online
Individual,Sole trader& Partnership firmQuarterly1) I st Quarter( Apr to Jun) - On or before 5 th of July 1) I st Quarter( Apr to Jun) - On or before 6 th of July
2) IInd Quarter( July to Sept) - On or before 5 th of Oct 2) IInd Quarter( July to Sept) - On or before 6 th of Oct
3) IIIrd Quarter(Oct toDec) - On or before 5 th of Jan 3) IIIrd Quarter(Oct toDec) - On or before 6 th of Jan
4) IV Quarter( Jan toMar) - On 31 st March 4) IV Quarter( Jan toMar) - On 31 st March
OthersMonthlyOn or Before 5 th of Next Month. March - on March 31stOn or Before 6 th of Next Month. March - on March 31st

Example : A private Ltd Company should pay  April month service tax on or before may 5th or May 6th if paid through online.March month should deposit on March 31st itself.

A partnership firm should deposit quarterly hence it should be collected from April to June Deposited on or before July 5th , or July 6th if paid through online. and for March on March 31st.

Example Scenario for this tutorial

Lets have some example for learning purposes in tally erp 9 .

 Let us assume that ABC Ltd a clearing and forwarding Agent Provided Agency services to XYZ Ltd For Rs 100000.00 on 01-06-2016 and there is no other bill for that month.

ABC Ltd has to pay Advertising bill Rs 11500.00 (Amount of service 10000+ 14% Tax 1400 + Swachh Barat Cess 0.5% Rs 50/- Krishi Kalyan cess 0.5 % Rs 50) from Adstar Advertisers as Advertising Charges  in which Rs 1500 levied as ST.

Now let’s calculate  with this example.

Total Services Provided : Rs     100000 x  14%     =    14000.00

Swachh Barath Cess on ST               : Rs     100000 x  0.5%   =        500.00

Krishi Kalyan Cess                            : Rs     100000 x  0.5%   =        500.00

(A)Total Service tax Due                                                                     15000.00

(B)Input Service Tax Credit on Advertising bill                                1450.00

Credit for SBC (Swatch Bharath Cess) Not available

Net Tax Payable ( A-B)                                                                    13550.00

Note: Cenvat credit on service tax cannot be utilized for the payment of Krishi kalyan cess and reverse.

Lets do this calculation in tally 9.

Now let’s do this with tally ERP9

There are four Steps for entering Service tax In tally

They are as follows.

  1. Enabling
  2. Master Creation
  3. Transactions or Voucher Entry
  4. Payment

These are the five important things to learn at initial stage we will provide some advanced tips on later stages.

Step1-Enable Service Tax

To activate go to

Gateway of Tally>>F11 Features>>Statutory &Taxation

In the statutory & taxation screen “enable service tax” & Set /Alter Service Tax Details to Yes as shown in the below  images

Activate service tax in F11 Statutory Features

Press enter; you will see another form where ST details will be asked. Enter the details as shown below.

  • Registration Number : BYCPQ7825PST009
  • Type of organisation: Registered Private Limited Company

Service tax details in service tax features screen

In the list only four types of organisations are displayed. if Your organisation type not in the List,Click on F12 Key or Function Key F12 Configure Button from same screen. You will get another configuration screen. and enable option : Show All organisation Type : Yes. 

You will get all organisation type as shown below

List of all organisation types for service tax setup

 

Press enter key again statutory and taxation screen appears, save the screen. That’s it.

Here we are not activating Set/Alter tax details, because we are setting service tax at ledger level.

Press Enter to save the screen.

Step2-Creating masters

We create create all the masters, that is ledgers for entering transactions.

purchase Ledger

At first we are going to create a Advertising purchase ledger, In our example we are purchasing Advertising From Adstar advertising, Lets create “Purchase Adverting ” under Purchase Account.

Recommend Read: Create Purchase Ledger

Go to Gateway of Tally > Accounts Info > Ledgers > Create

In the Ledger creation Screen fill the required field

  • Name:  Name of the Purchase Ledger, Let’s Name it Purchase-advertising
  • Under: Purchase Account
  • Select Applicable to the Question is Service tax applicable?
  • Set/Alter Service Tax details : Yes and press enter, you will be in service category creation screen

service-category-creation

In the category creation screen Enter the following

  • Name: Name of the advertising service purchasing, here Advertising
  • Service Tax : 14 %  is the prevailing rate.
  • Swachh Bharat Cess: 0.5 %
  • Krishi Kalyan Cess: 0.5 %

See the final image of Purchase Ledger created.

Create service purchase ledger

Creating Service Sales Ledger

In our example  ABC LTD is a clearing and forwarding agent, providing agency service hence we are creating a “Sales-Agency Services” Ledger.

  • Name: Sales-Agency Services
  • Under : Sales Account
  • Make Applicable to the question Is service tax applicable?
  • Set/alter service tax details : Yes

You will get Service category creation screen.

Enter the details in service category creation as follows.

Sales service category creation

Press Enter and save the screen.The sales ledger creation screen look like below.

Sales service ledger creation

Creating Service Provider Ledger

We have to create the ledger of party from whom we purchase service, In our case it is Adstar Advertising,The advertising agency doing our Advertising.We have to pay them against their invoice. So create a ledger under sundry creditors.

Recommend Read: Create Sundry Debtors & Sundry Creditors Ledger.

Gateway of Tally> Accounts Info.> Ledgers> Create

Before you start make sure that you have activated “ Allow advanced Information in masters” & “Use address for Ledger Accounts “To do this press F12 ,You will get a ledger configuration screen and do as instructed and save

Ledger Configuration screen

Now create ledger as usual, Fill the field as follows

  • Name: Adstar Advertising
  • Under : Sundry Creditors
  • Maintain balances bill by bill: Yes
  • Default Credit Period:   set if required like 30 days
  • Enter Address,PAN etc
  • Set Alter Service Tax Details: Yes, a new screen will appear fill up as follows.

Service tax details of service providerPress enter to save.The Final screen for the ledger is as follows.

Service provide ledger creation screen

Create Service receiver Ledger

It is quite similar to creating Service provider Ledger, In our case it is XYZ LTD is the customer Create a ledger under sundry debtors.

Gateway of Tally> Accounts Info.> Ledgers> Create

  • Name: In our example We are providing service to XYZ Ltd. They are our customer
  • Under: Sundry Debtors
  • Maintain Bill-by-bill : Yes
  • Default Credit Period : Something like 30 days or as per your company credit policy
  • Enter address,PAN etc
  • Set/alter service tax details: Yes and press enter , tally ask the details of service receiver.

Service tax details of service provider

Press Enter to save the details of service receiver.

Service receiver ledger

And finally save the screen to create the service receiver ledger.

Service Tax Ledger creation in Tally ERP9

Next step is to create ledger, as mentioned above there are three elements

  1. Service Tax @14%
  2. Swachh Bharat  cess 0.5%
  3. Krishi Kalyan Cess 0.5%

All three of these element  is charged on total assessable value or on total taxable service provided. The total rate is 15%.However you cannot charge all together. You have to account Service tax ,Swachh Barat cess, Krishi Kalyan cess separately and make payment separately.

So we are going to create these three ledgers for accounting Output and Input service tax.

Input service tax: The ST we paid at the time of purchasing a service.For Example: when we purchase advertising service from another company, they will provide us an invoice, the tax paid by us in that invoice is called in put service tax. The input service is CENVAT Creditable.

Output Service tax: The tax we collected at the time of providing a service.For example: when we Provide a service to another company, the tax mentioned in the service invoice is called an output service tax)

The net difference between output tax and input tax is called tax payable

In this example we are going to account both input tax and output tax in a single account, the advantage is that the net balance itself shows the tax payable.

Creating ST ledgers

Go to Gateway of Tally> Accounts Info.> Ledgers> Create

  • Name: Service Tax
  • Under: Duties & Taxes
  • Type of duty: Service tax
  • Tax head: Service tax

Service tax ledger

Press Enter &  Save

Creating Swachh Bharath Cess Ledger

To create swachh bharat cess,

Gateway of Tally> Accounts Info.> Ledgers> Create

  • Name: Swachh Bharat Cess
  • Under: Duties & taxes.
  • Type of duty/tax : Swachh bharat cess

Swachh bharat cess

Press enter to save.

Krishi Kalyan Cess Ledger Creation.

Krishi kalyan cess is the new cess introduced from 1st June 2016.To create Krishi Kalyan cess.

Gateway of Tally> Accounts Info.> Ledgers> Create

  • Name : Krishi Kalyan Cess
  • Under: Duties & taxes
  • Types of duty/tax: Krishi Kalyan cess 

Krishi Kalyan cess creation

Step3- Transactions or voucher entry.

Purchase of Service: Here we have purchased Advertising service from Adstar Advertising; it should be recorded in purchase voucher as it is the direct expense of our company. If service purchased for a non service providing company purchases are considered as expenses and should be recorded in journal voucher.Lets do this entry in tally.

Recommend Read:

Rules for availing 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 w.e.f 1-4-2011 (applicable only for the service bills raised after 1-4-2011). However if the payment is not made to the service provider within 3 months then, the Service tax credit utilized has to be reversed.

Purchase Entry

Go to Gateway of Tally>Accounting Voucher >F9

Now you are in Purchase Voucher

Press Alt +I to get Account Invoice

account invoice button

Now Change Date by pressing F2, 01-06-2016

  • Type Supplier Invoice No : AS/2501/16-17
  • Party A/c Name: Select Adstar Advertising
  • Particulars: Select the Purchase Ledger in our case “Purchase Advertising” enter amount in the amount field
  • In the next lines Select Service tax, Swachh bharat cess, Krishi Kalyan Cess, the amount will be automatically calculated.
  • The screen will look like below

service-tax-purchase-voucher

To view Tax analysis from service purchase voucher click , Tax analysis button or shortcut Key Alt+A, To view tax analysis in detail press Alt + F1 or Click on detailed button.

Service purchase of tax analysis

Esc to come back and save the service purchase screen. Press enter and save

Service Sale Voucher or service invoice entry

Now service sales voucher entry, or service invoice entry In our case we are providing agency service worth Rs 100000.00 to XYZ Ltd.To enter service invoice go to

Gateway of Tally>Accounting Vouchers> F8 (Sale Button)

  • Use Alt + I to change item invoice to Accounts Invoice if not already there.
  • Reference No: Enter any reference number like PO number
  • Party A/c Name: Service Receiver Name XYZ LTD
  • Particulars: Sales –Agency Services
  • Amount: Enter amount of Service here 100000
  • In the next line select service tax, swachh bharat cess, Krishi Kalyan Cess the amount will automatically calculated.

service-tax-sales-voucher-or-invoice

Press enter and accept the screen

You can view tax analysis by clicking Alt + A  then Alt + F1 for detailed view as shown below.

tax analysis screen of service sales vocuher

Now we have completed purchase and sales transactions.

Print Service Invoice

To Print Service Invoice.Access Sales voucher in alteration mode. Press Page Up Button from Sales Voucher or You can access voucher from Dispaly> Day Book 

In the Voucher Alteration mode click on Print Button or Click on Alt + P The Print configuration button will appear.

Service tax invoice printing configuration screen

In this screen you can select printer ,Set Number of copies to be printed,Print format by using options or buttons provided at the bottom right of the screen. Click on Yes to Print the Invoice.Here is a typical service invoice copy printed with Tally.

Service Invoice Format printed with tally erp9

Step4-Payment transaction

And finally payment of ST, To make payment

Go to  Gateway of Tally>Accounting Voucher>Payment Voucher(F5)

Use shortcut Key Alt + S or click on S: Stat Payment to view Statutory Payment screen

Service tax, SBC, KKC Payment

 

Now bank allocation screen, enter all bank related questions. Enter all details and save payment voucher.

GAR 7

GAR 7 is the Challan Used for depositing Service Tax. Tax should be paid electronically and it is made compulsory vide Notification No. 01/2010,dtd 19-02-2010. In Tally.ERP9 Latest Versions,You cannot generate GAR 7.

Viewing of Reports

To view reports. You can Go to

Gateway of Tally> Display> Statutory Reports>Service Tax Reports

In this Reports You will find

  • Form ST3
  • Form A3
  • Return Transaction Book
  • Challan Reconciliation

Each and every report we will discus in coming articles. Here is Typical Form ST-3 Report. This report is called Service tax triangulation report.

Service tax triangulation report Form- ST 3

We can have a detailed discussion about Triangulation report and correction of any exceptions showing. I am here .Any clarification is required please comment.

Comments (11)

  • Thanks for the details. It was really very helpful. I want to know whether there is any provision for reverse charge mechanism in tally.

    Reply
  • thanks sir..finally i got it …what i have search …

    Reply
  • Hi,
    When i do payment with alt+s it showed exclude transaction and did not deduct the balance st payble after adjustment.. How can i solve this!!?!??

    And why new release dont show billwise detail of service tax??? Like below 4.93 series in tally

    Reply
  • sbc can not be adjust. but in your example amount of sbc which you have paid is after adjusting sbc. how?

    Reply
  • Sir,

    Service Tax including KKC is 15% , In triangular report , for Rs.1,00,000/- it shows tax Rs.14500/- but 15% is 15000/- please clarify

    Reply
  • I hope we need to use Stat Adjustment
    and the Stat Payment

    Reply
  • Very helpful. I’m trying for it for last 2-3 months, but could not follow the steps as I’m not a commerce guy. But, you have explained all the steps in a simple and understandable manner. Thanks a Lot.

    Reply
  • After list of categories in creating service tax we are unable to fill up the service tax and education cess Krisi Kalyan cess,
    And next problem,
    Is my when purchasing with the the rate of 100and putting the service tax 14% 14 and education cess. 5%. 7%, and Krisi Kalyan cess. 5%,. 7%,
    Mean total service tax should be 15% but here is 14.14%
    Same problems creating on the sales voucher.
    There is big problem plz resolve any one.

    Reply

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