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This is a tax that is levied on the services rendered. It is applied on the total price of the service.
Prerequisites
In addition to the standard Implementation Guide (IMG) settings for taxes on service tax, you must also have maintained the tax registration numbers of your vendors, customers and your own plants.
If there are multiple tax registration numbers, you should have separate account postings to different General Ledger Accounts based on service registration number. You can do this provided you have maintained a separate tax code for each service registration number. To do this, for every service registration number, you should define separate General Ledger Accounts for service tax and education cess on service tax.
Features
Service tax has the following features:
· It is charged at 12% on the price of the service rendered.
· An education cess of 2% is applicable on the service tax.
· This is a deferred tax. Only the amount of service tax that is actually received (credits) by the customer can be offset against the tax payable.
The interim General Ledger Account contains the total service tax that you have to receive. The final General Ledger Account contains only the actual amount that you have received. You can take credit for only the amount in the final General Ledger Account.
· Service tax can be used to set off excise duty paid by you. Additional duty of customs cannot be used to set off the service tax paid by you.
· This tax is payable to the Central Government.
Example
The price of the service is INR 10,000.
Service tax that is applicable is INR 1,200.
Education cess is INR 24.
Total amount to be received by you is INR 11,224. The system updates the interim General Ledger Account with this amount.
Now, assume that the customer makes a part payment, out of which INR 500 is against service tax. You have to manually update the final General Ledger Account with this amount.
You can offset only INR 500 against the payables in that month.
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