Struggling with Accounting Formats and Service Tax for Incentive Plans – Can You Help?

Request for Assistance with Accounting Formats

Good evening everyone, my name is Shweta Sharma. I started a firm one year ago, and I am currently working from home with a team of three employees. Could anyone please assist me with easy accounting formats? Accounting is not my forte as I primarily focus on recruitment. Additionally, I would appreciate guidance on how to handle service tax payments.

Incentive Plan Details

I have an incentive plan in place where I share 10% of the billing amount above 1 lakh with recruiters upon payment by the employers. Please feel free to share any suggestions or important considerations I should keep in mind regarding this incentive plan.

Thank you and regards,
Shweta

Hi Shwetha Sharma,

First of all, I would like to understand whether you have registered under Service Tax. If yes, then you may charge service tax of 15% on the final bill value (Service Tax 14% + Swachh Bharat Cess 0.5% + Krishi Kalyan Cess 0.5%).

There is reverse taxation if it involves manpower supply. Under this, you need not charge, as the employer will be paying to the government.

For more details, you may reach me.

Understanding Accounting and Service Tax for Small Firms

Accounting predominantly involves recording business or professional transactions to determine the financial outcome. According to Section 44AA of the Income Tax Act, 1961, if your income exceeds ₹120,000 or your turnover/gross receipts exceed ₹10 lakhs in any financial year, you must maintain books of accounts.

Service Tax Guidelines for Recruitment Services

Regarding service tax, recruitment services fall under the category of supplying manpower. If your turnover exceeds ₹9 lakhs, you must obtain a service tax number. If your turnover exceeds ₹10 lakhs, you can start collecting the 15% service tax and remit it to the government. As a proprietor or partnership firm, you must pay service tax electronically by the 6th after the quarter ends. However, for the current quarter (1/1/2017 to 31/3/2017), the due date is 31/3/2017. Half-yearly filings are required, with the due date being 25th April for this half-yearly period. Section 68 of the service tax addresses reverse charges as per Notification 7/2015-ST dated 1/3/2015. Effective from 1/4/2015, the service of supplying manpower falls under 100% reverse charges, meaning there is no need to charge service tax on the service invoice; the service receiver shall pay 100% service tax instead of the service provider.

Also, note that reverse charges apply only if you issue the invoice to a body corporate. For entities other than a body corporate, no reverse charges shall apply.

Thanks & Regards,

V SHAKYA

HR & Labour, Corporate Laws Advisor