TAXATION
ENTRIES FOR VAT,EXCISE,SERVICE TAX AND TDS
Sometimes
people have good idea about the taxation they know very well the provisions of
tax and effectively compute the tax liability monthly/quarterly/half-yearly or
yearly basis as the case may be. But at the time of making journal entries for
such tax liabilities or payments they gets confused. This article through an
light on making journal entries on these aspects. Let’s start:-
I
Value Added Tax
The
organizations engaged in Sale and purchase transactions have to pay Vat
liability. When they purchase material Vat is paid on purchases and when they
sell material Vat is collected on material.
Vat
paid on purchase of material-Input
Vat
paid on Sale of Material-Output
Output
amount is adjusted with the input and the balance is paid to the department. Entries
to be made are:-
At the time of Purchase of Material
Purchase
Dr………….
Vat
Input Dr……………
To
Creditors……………………
At the time of Sale of Material
Debtors
Dr……………….
To
Sales………………………….
To
Vat Output…………………..
At the time of Adjustment
Vat
Output Dr………………..
To
Vat Input……………………………..
To
Vat Payable (If Output>Input)………………………………
At the time of Payment
Vat
Payable Dr…………………………..
To
Cash/bank
II
Service Tax
Organizations
engaged in providing services are supposed to pay service tax and following
entries are made:-
When services are received:-
Expenses
Dr………………………
Service
tax Input Dr………………
To
Party
When services are provided
Debtors
Dr……………………
To
Revenue………………………
To
Service tax Output……………
At the time of Adjustment
Service
tax Output Dr…………….
To
Service Tax Input…………………….
To
Service tax Payable……………………….
At the time of Payment
Service
tax Payable Dr………………….
To
Cash/bank…………………………………….
As
you can analyze the entries for Vat and Service tax are almost same. Entries
for excise duties too are on same parlance with a minor difference. Let’s check
out what are those differences.
III Excise Duty
At the time of Purchase
Purchase
Dr……………..
Central
Excise Input Dr………..
Education
Cess Input Dr……………….
Secondary
and Higher Education Cess Input Dr.
To
Creditors
At the time of Sale
Debtors
Dr…………….
Manufacturing
Duty (Basic+Education Cess+Secondary & higher education cess) Dr.
To
Central Excise Output …………………..
To
Education Cess Output…………………..
To
Secondary & higher education cess Output……………
To
Sales (Including excise duty amount)…………………………………………………..
As
per the guidance note of ICAI excise duty is added in Sales amount and in the
financial statements shown by way of deduction from Sales figure. So
corresponding figure of excise duty is recorded by name of manufacturing duty
to nullify the impacts of duplication in records.
IV
Tax Deducted At Source
While
making payments TDS is deducted as per the applicable provisions and such
deducted tds is deposited with the department.
At the time of deducting TDS
Expenses
Dr……………
To
TDS Payable………………….
To
Party………………………………
At the time of deposit of amount of
TDS
TDS
Payable Dr………………………
To
Cash/Bank………………………………………
In
Similar way entries for TDS deducted on income to be recorded.
At the time of booking of income
Party
Dr…………………….
TDS
deducted………………………
To
Revenue receipts……………………………….
At the time of receipt of Income
Bank/Cash
Dr………………………..
To
Party……………………………………..
Hope
now you get the idea of making journal entries of tax related transactions.
Please comment on the article if you like or not. Thanks.
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