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Basics of Excise and Service Tax entries

Very important part of audit in a manufacturing concern is Excise and Service Tax reconciliation with books of account; first of all you must be aware of following entries passed in books of account.

There are 21 accounts related to Excise and Service Tax accounting entries.

Sr. No. 1. 1. 2. 3. 4. 5. 6. 7. 8. 9.

Account Name Central excise duty account Edu. Cess on excise duty account Hi. Edu. Cess on excise duty account Cenvat credit received account Edu. Cess on cenvat credit received account Hi. Edu. Cess on cenvat credit received account Cenvat Received on capital account

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Edu. Cess on cenvat Received on capital account Hi. Edu. Cess on cenvat Received on capital account 10. Cenvat Receivable on capital account 11. Edu. Cess on cenvat Receivable on capital account 12. Hi. Edu. Cess on cenvat Receivable on capital 13. Service Tax credit account 14. 15. 16. 17. 18. 19. 20. 21. Edu. Cess on Service Tax credit account Hi. Edu. Cess on Service Tax credit account Service Tax on GTA account Edu. Cess Service Tax on GTA account Hi. Edu. Cess Service Tax on GTA account Central excise PLA account Edu. Cess on excise PLA account Hi. Edu. Cess on excise PLA account

Balance Account Head Dr/Cr Cr Current Liability Cr --do-Cr --do-Dr Loans, Advances & Deposits Dr --do-Dr --do-Dr Loans, Advances & Deposits Dr --do-Dr --do-Dr Dr Dr Dr Dr Dr Dr Dr Dr Cr Cr Cr Loans, Advances & Deposits --do---do-Loans, Advances & Deposits --do---do---do---do---do-Current Liability --do---do--

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Prepared by Bhavyaraj Jadeja

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445 Cr Rs. Additional PointThere are many types of sales accounts depending upon types of products or sales transactions.Explanation of Central excise duty account Central excise duty account is related to sales. 3. 2% edu cess and 1% hi. 3.A. Unlike Edu. Vat is calculated on these charges also. Effect depending uponProducts Products Products Out of Guj sales with C form Out of Guj sales without C form 4% Vat Output account 12. additional Vat 1% or 2.000 600 300 13. will be calculated on gross amount i. Cess on excise duty account To 4% Vat Output account To 1% addl.e. Edu. N.20xx By Y account To 4% Sales account To Central excise duty account To Edu.xx.000 30. --do---do---do---do-- Imp PointVat is always charged on final bill value i. N. 3.A. after considering excise. Vat Output account 2. Date To/By Particulars xx. Cess and Hi. few are listed below those are mostly shownSales account 4% Sales account Vat/Cst account Additional Vat account 1% addl. not on 4% or 12. If any freight exp or P&F charges are charged in bill. Vat Output account N. Cess on central excise duty. Edu.e.00. Here. its accounting entry will be like such [Current rate of excise duty is 10%. we assume sale has been made within Gujarat and of 4% Vat.00. Liab.47. When a mfg company sales its products. Vat Output account Dr Rs.5% as the case may be. Edu.5% Vat Output account 15% Sales account 15% Vat Output account Sales OGS 2% 2% Cst Sales OGS 5% 5% Cst Prepared by Bhavyaraj Jadeja Page 2 .5% addl. Cess.309 Remarks Debtor Income Cur. Sometimes 4% additional duty is also charged.5% Sales account 12. X co sells goods to Y for amounting to Rs. Cess on excise duty account To Hi.]For example.000 on which excise and vat are levied.5% vat amount.A.236 3.

5% addl. Prepared by Bhavyaraj Jadeja Page 3 . depending upon types of products or purchase transactions.A. few are listed below those are mostly shownSales account 4% Purchase account 12.581 Creditors for goods Additional PointLike sales. Vat Input account N. 10. 2% Cst is considered to be purchase cost as Cst credit is not allowable. Vat Input account Cenvat credit received account Edu. Remarks Expense L. 5% Cst is considered to be purchase cost as Cst credit is not allowable. Cess on cenvat credit received account Hi.20xx To/By By By By By By By To Particulars 4% Purchase account 4% Vat Input account 1% addl.5% Purchase account 15% Purchase account Purchase against C form Purchase without C form Vat account 4% Vat Input account Additional Vat account 1% addl.000 441 110 1. A & D --do---do---do---do-11.xx. Cess on cenvat credit received account Party’s account Dr Rs. Effect depending uponProducts Products Products Purchase from out of Guj against C form Purchase from out of Guj without C form 12. Date xx.Explanation of Cenvat credit received account Cenvat credit received account is related to purchases. This entry will be easy as it is made from purchase bills like ‘lakhelu vanchay’.5% Vat Input account 15% Vat Input account Here. Here we assume purchase has been made within Gujarat and of 4% Vat. there are many types of purchase accounts also. Vat Input account 2. Edu.000 20 10 Cr Rs.

Prepared by Bhavyaraj Jadeja Page 4 . Edu.50. Cess on cenvat Receivable on capital 4% Vat account 1% addl.758 2. For example. X co has purchased machinery.89.500 250 125 12.000 500 250 11. A & D --do---do---do---do---do---do---do-2. Remarks F.030 2.500 250 125 11. Cess 1% Hi.50.538 Creditors for Assets Additional PointVat credit can also be taken from the purchase of Plant and Machinery.Explanation of Cenvat Received on capital account and Cenvat Receivable on capital account As you know.20xx To/By By By By By By By By By By To Particulars Plant and Machinery account Cenvat Received on capital account Edu. Vat account Party’s account Dr Rs. Asset L.538 Its accounting entry will be passed as underDate xx. Cess on cenvat Receivable on capital account Hi. the invoice shows the following figures.000 12. one part of cenvat will be utilized during the year and the second will be carried forward for the next year. 2. Cess on cenvat Received on capital account Cenvat Receivable on capital account Edu. Cess on cenvat Received on capital account Hi. Cenvat credit on capital goods can be availed @50%. Particulars Value of machinery 10% Excise Duty 2% Edu.000 25.030 2. Cess 4% Vat 1% Vat Total Invoice amount Amount Rs.xx. 2. Edu.89.758 Cr Rs. Edu.

20xx By Legal & Professional exp By Service Tax credit account By Edu. Edu.xx.000 1. Remarks Expense L.030 Creditors for expenses Prepared by Bhavyaraj Jadeja Page 5 . [Current rate of Service Tax is 10. Cess on Service Tax credit account By Hi.3%] Particulars Legal exp Service Tax Amount Rs.000 1.000 20 10 Cr Rs.Explanation of Service Tax credit account A mfg co can utilize service tax credit against excise duty. A & D --do---do-11. 10. For example. 10. Cess on Service Tax credit account To Party’s account Dr Rs. Legal & Professional exp bill shows the following figures.030 Its accounting entry will be passed as underParticulars Date To/By xx.

02.000 250 1. 1. you should refer Service Tax on GTA. Cess Service Tax on GTA account By Hi.32 1. Edu.2011 22.2011 08. Cess Service Tax on GTA account To Bank account Dr Rs. during the month of February-11.400 350 900 225 1. as per this rule.2011 19.250 is mandatory to deposit monthly to the credit of central government.2011 Amount 25% 10% 1.02.750 or with other goods Rs.2011 13.2011 27.02.300 Service Tax will be payable for the month of February 2011 as followingDate 02.000 1.2011 22.16 Cr Rs.2011 19.25 0.03.2011 By Service Tax on GTA account By Edu. on freight which singly exceeds Rs.02. Remarks L.46 0.35 0.23 0.32 Total Service Tax 36 24 26 34 120 1% 0.16 Accounting entry will be passed when this challan will actually be paid.33 1.2011 Particulars By Cash a/c By Cash a/c By Cash a/c By Party a/c By Party a/c By Bank a/c Amount Rs. 116 2.50 0. Service Tax.400 700 300 900 1.66 2. Date To/By Particulars xx.02. Freight exp account had been as followingDate 02.02. The accounting entry would be as suchFor example.02.2011 27.02.02.300 325 Total payable by challan 35 23 25 33 116 Service Tax 2% 0.Explanation of Service Tax on GTA account Now.02. A & D --do---do-120 Cur.1. Assets Prepared by Bhavyaraj Jadeja Page 6 .70 0.

Edu. most important and please refer it carefully.52 Prepared by Bhavyaraj Jadeja Page 7 .000 20 10 116 2. we turn on adjustment part.000 20 10 12. Cess on Service Tax credit account Service Tax on GTA account Edu.68 153.68 figures 153. Paying off excise duty by challanDate To/By Particulars 30. Cess on excise PLA account Hi. Remark 1. Cess on cenvat credit received account Hi.84 Actual figures 2. and is payable to the central government after utilizing Cenvat credit received account.500 250 125 1. Edu. Cess on excise duty account Hi.xx. Cess on excise PLA account Dr Rs. You observe that Central excise duty account shows the credit balance. Edu.32 1.000 600 300 Cr Rs. Edu. Cess on excise PLA account To Bank account Dr Rs.384 Balancing 307. Cess on excise PLA account By Hi. 1. Cess Service Tax on GTA account Central excise PLA account Edu. There are two accounting entries will be passed as under that will be made per month.Explanation of Central excise PLA account Now. 30. Cenvat Received on capital account. Cess on cenvat Received on capital account Hi. Utilizing all credits(the figures are taken from above examples)Date 30.845.20xx By Central excise PLA account By Edu.16 15. Cess on excise duty account Cenvat credit received account Edu. 15. Edu.20xx To/By By By By To To To To To To To To To To To To To To To Particulars Central excise duty account Edu. Service Tax credit account.xx. Service Tax on GTA account. Cess Service Tax on GTA account Hi. Edu. Cess on cenvat Received on capital account Service Tax credit account Edu.84 Cr Rs.384 307. Cess on cenvat credit received account Cenvat Received on capital account Edu. 15. Cess on Service Tax credit account Hi. Edu.

Edu. there is a possibility of opening and closing balances that must be tallied with Excise Return that is in short called as ER-1 and Personal Ledger Account that is in short called as PLA register with accounting closing balances. Prepared by Bhavyaraj Jadeja Page 8 . Due to this. Cess on cenvat Receivable on capital account and Hi. can only be utilized in the next year. Edu. In the beginning of next year. if you think.Very Important pointsThere is no need for utilization of full credits. we have full money today and in near future there is a time of crisis. Edu. You observe that Cenvat Receivable on capital account. Edu. 50% Cenvat credit receivable on purchase of capital goods. Cess on cenvat Received on capital account and Hi. you may utilize less credits right now and will gather the unutilized credits and shall utilize when you will have no enough money. Edu. As you know. Cess on cenvat Receivable on capital account would still have been stood in accounts till the year end. Edu. this balance of Cenvat Receivable on capital account. Cess on cenvat Receivable on capital account will be transferred to Cenvat Received on capital account. Cess on cenvat Receivied on capital account respectively. Cess on cenvat Receivable on capital account and Hi.