BOOKS OF ACCOUNTS UNDER SERVICE TAX

[Dr. Sanjiv Agarwal]

According to Rule 5 of Service Tax Rules, 1994, records include computerised data and means the record as maintained by an assessee in accordance with the various laws in force from time to time. Records maintained as such shall be acceptable to Central Excise Officer. The records as maintained under any other statute or fiscal law shall be acceptable to service tax authorities. Every assessee is required to furnish to the Central Excise Officer at the time of filing his return for the first time a list of all accounts maintained by the assessee in relation to service tax including memoranda received from his branch offices. This intimation may be sent alongwith a covering letter while filing the service tax return for the first time.

The assessee should maintain such records as would enable him to —

(i)    calculate value of taxable services as per provisions of section 67;

(ii)    calculate service tax liability correctly;

(iii)   ensure that proper credit of service tax on inputs services is availed.

Rule 4A prescribes that taxable services shall be provided and input credit shall be distributed only on the basis of a bill, invoice or challan. Such bill, invoice or challan will also include documents used by service providers of banking services (such as pay in slip, debit-credit advice etc.) and consignment note issued by goods transport agencies. New Rule 4B provides for issuance of a consignment note to a customer by the service provider in respect of goods transport booking services.

These documents should disclose the required information about service provided, service provider and receiver of service.

Rule 4A prescribes that taxable services are to be provided or credit has to be distributed on invoice, bill or challan only. Such documents should be serially numbered and shall contain—

(i)    name, address and registration number of service provider,

(ii)    name and address of service receiver,

(iii)   description, classification and value of taxable service, and

(iv)   service tax payable thereon.

In case of banking services, such details like serial number and address of person may not be available. In case of goods transport services, consignment note or any other document containing the prescribed particulars will also be included in such documents. Similar requirement will have to be fulfilled by input service distributors. W.e.f. 1st April, 2005, the invoice/challan/bill etc have to be issued within 14 days from the completion of provision of services or receipt of payment whichever is earlier (vide Notification No. 7/2005-ST dated 1.3.2005)

Rule 4B provides that any goods transport agency which provides goods transport services shall issue a consignment note to the customers in prescribed proforma containing the following information —

(a)   Serial number

(b)   Name of the consignor and consignee

(c)   Registration number of the goods carriage in which the goods are transported

(d)   Details of goods transported

(e)   Details of the place of origin and destination

(f)    Person liable for paying service tax whether consignor, consignee or the goods transport agency

In 2006, Service Tax Rules, 1994 ware en amended vide Service Tax (Amendment) Rules, 2006 - Notification No. 05/2006-ST dated 1.3.2006 (effective from 1.3.2006).

•      Rule 5(3) makes it obligatory for an assessee to preserve records at least for a period of five years.

•      Rule 5(4) makes it obligatory for an assessee to make available records maintained by him to a Central Excise Officer for the purpose of inspection or examination. However, such inspection or examination can be undertaken only after the written approval of the jurisdictional Assistant/Deputy Commissioner. It may also be noted that the assessee is required to make available the records in his registered premises. This sub-rule has been omitted w.e.f. 28-12-2007 vide Notification No. 45/2007-ST, dated 28-12-2007 and new rule 5A has been prescribed for imposition and access to records etc.

Vide Notification No. 45/2007-ST, dated 28-12-2007, Rule 5(2) had been substituted according to which —

a)     All existing assessees will be once again required to furnish to the Superintendent of Central Excise, list of records etc. in duplicate maintained by him latest by 31st January, 2008. The list of records etc. should be furnished at the time of filing of first service tax return or 31st January 2008, whichever is later. Thus, where an assessee was registered with service tax department even since in 1994 and had already submitted list of books of accounts and records in 1994 itself will now be required to furnish the same again before 31st January 2008.

b)     List should be of all the records prepared and maintained including all other financial records. This would include books of accounts, records, registers, returns and secondary books, other statutory record etc.

c)     The list of records should comprise of all such records prepared or maintained by the assessee for accounting of transactions in relation to —

(a)   providing of any service, whether taxable or exempted;

(b)   receipt of procurement of input services and payment for such input services;

(c)   receipt, purchase, manufacture, storage, sale, or delivery, as the case may be, in regard of inputs and capital goods;

(d)   other activities, such as manufacture and sale of goods, if any.

As per Cenvat Credit Rules, 2004

Rule 9  of Cenvat Credit Rules, 2004 deals with documents and accounts and prescribes the documents for permitting Cenvat credit, actions to be taken by manufacturer and service provider, records to be maintained and returns to be submitted. Accordingly, documentary evidence shall be the basis for availing Cenvat credit. The manufacturer or output service provider or input service distribution shall avail Cenvat credit or the basis of invoice issued by a manufacturer/importer/first stage dealer, supplementary invoice, challan, bill of entry, certificate issued by appraiser of customs, invoice/bill/challan issued by input service provider or input service distributor.

Suggested Books of Accounts

It is advisable to keep the following books and records as books of accounts for the purpose of service tax  and Cenvat Credit  :—

1.     Cash Book;

2.     Bank Book;

3.     Journal Book;

4.     Cash, Bank and Journal vouchers (debit and credit);

5.     Sales bills and registers including supplementary invoices (showing service tax separately);

6.     Invoices / challans for input credit distribution and consignment notes, if any;

7.     Purchase bills and registers;

8.     Other subsidiary records, ledgers and registers as may be necessary.

9.     Record/Register of receipt and consumption of input, input services and capital goods and tax paid thereon, output Cenvat credit claimed and balance to claim Cenvat Credit.

10.   Files containing service tax agreements entered into with clients or customers.

The accounts should be prepared and maintained in such a manner so as to ensure relevance, reliability, understandability and comparability.

Section 12-A of the Central Excise Act, 1944 has been made applicable to Service Tax which implies that the amount of service tax should be prominently indicated in all the documents relating to assessment, sales invoice, receipts and other similar documents.

The Institute of Chartered Accountants of India has prescribed the following books to be maintained by practicing members (Notification No. 1-CA (153)/ 86 dated 18.8.1986) —

(i)  Cash Book

(ii)  Ledger

Assessees may note to issue necessary credit notes for bills cancelled and maintain adequate record and books of account to claim service tax input credit in case of payment of service tax to other service providers as per credit Rules.

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