How to pass the Journal Entry of Service Tax in the books of Company

I am receiving many queries from accountants in which they want to know how to pass journal entry of Service tax . I have already published two articles for deep accounting treatment of Service tax and Service tax treatment presentation .

Again , I provide more information for benefit to all . Service tax is Indirect tax . It means , its burden is transferred from businessman to Service Users . So , when Company received the money of service , he also receive service tax include it .

Example

Suppose service tax is 10 % and Company receives total money for providing service Rs. 100000 , then service tax is Rs. 10000 .

1. Now when , company receives money , the following journal entry will pass .
Ist way

Bank Account Debit 100000
Party of Service uses Account credit 90000 ( Net Amount )
Service Tax Account Credit 10000

Because , party has given us 10000 for paying Govt. as the amount of service tax . So , service tax is our current liability and When can also treat above transaction as following way

or

Second way

Bank Account Debit 100000
Party of service uses account 100000

Here we deem that party has given full amount and , it is our duty to pay service tax .
So above both way is correct

2nd journal entry

When we paid service tax to service tax department

Service Tax Account Debit 10000
Bank Account Credit 10000

I think now , you understand this tutorial and you can easily use it practical .