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Former Member
Feb 17, 2011 at 09:08 AM

Service Tax on advances

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Hi All

We have already configured deffered and target tax codes for service tax which takes care of ensuring credit availment only after payment is made.

In a normal scenario, the deferred tax code is assigned in the customer invoice and the service tax is taken into Service Tax suspense account. After receipt of payment from customer and execution of the program, it is transferred from deferred tax code to target tax code. i.e from service tax suspense account to service tax payable account.

In a scenario when advance is received from customer what should be done. Should the target tax code be assigned during the transaction. If we select the target tax code the entry will get posted in Service tax payable. And when the invoice is raised if we select the deferred tax code then entry will be posted in Service tax suspense account. What would be next steps...and how will the accouting flow happen, should the program be executed in this scenario too.

Regards

Prasanna