In reverse charge under gst; the tax liability is imposed on the receiver of the goods or services. In normal case we know the seller , supplier or services provider is liable to collect tax from buyer and responsible for the payment of tax. GST mandates the reverse charge mechanism( RCM) in the following three scenarios of business.
- Purchase from un-registered dealer ( ULD), The buyer is liable to pay GST.( Exemption limit is 5000 in a day.) Section 9(4) of CGST/SGST (UTGST) Act, 2017/section 5(4) of IGST Act, 2017
- Import, The importer is responsible for tax payment.
- Certain goods and services notified by the govt under section 9(3) of CGST/SGST (UTGST) Act,
2017/§ion 5(3)of IGST Act, 2017.
Activate Revers charge in tally
F11 Features> F3 Statutory
Activate gst & set alter gst details, In the gst details screen.
Enable tax liability on reverse charge: Yes
Reverse charge voucher entry from unregistered dealer
ABC Ltd purchased 10 Nos mobiles from Vishal Mobiles @ 900 each. the gst rate of mobile is 12% HSN code is 8517. Vishal Mobiles is an unregistered dealer.
- Create a party ledger, Registration type of party should be selected as Unregistered.
- Create stock item mobile ,Set gst rate at stock item level.
When you purchase from an unregistered dealer, there will not be any tax in the invoice hence the purchase voucher entry look like .
Note: If you entered a purchase invoice of less than five thousand. The purchase will not become taxable. If you made another purchase from same dealer or another URD dealer in a day, the total of all purchase is greater than 5000, the entire amount will become taxable under reverse charge.
Reverse charge on purchase of service from Un Registered Dealer ( URD)
05-04-2018 ABC Ltd purchases ‘Accounting services’ Raj Associates Rs 6000. GST Rate for 18% ,Raj associate is an unregistered dealer of services.
- Create an accounting service ledger,Make sure that you Activate GST & Set alter gst rates in the ledger itself.
- Create raj associate ledger, registration type unregistered.
Accounting Voucher> F9 Purchases
For entering service invoice, you should change the voucher mode to accounting invoice use shortcut key Alt + I.
Click on Tax analysis Alt+F1 You can see the tax details subject to reverse charge.
Come back and save the voucher. You can view all these entries in GSTR-2 & GSTR 3B.
Reverse charge entry on inward supplies ( purchase)
Under section 9 (3) under CGST/SGST/UTGST Act and section 5(3) IGST Act states certain notified goods and services are compulsorily reverse chargeable irrespective of the status of dealer registered or unregistered.
On 06-04-2018 ABC Ltd purchases 10 KG tobacco leaves from Star tobacco international a registered dealer @ 250 /kg . GST rate is 5% under reverse charge.
- Create stock item tobacco leaves with reverse charge applicable & gst rate 5% . In gst details press F12 to get this option.
- Create star tobacco international as a registered supplier under sundry creditors.
Now enter the purchase
Reverse charge entry under import of services
When you import goods or services from foreign country IGST is applicable on Total value of commodity + Basic custom duty + cess + higher education cess.
On 07-04-2018 ABC Ltd imports Software Development services Worth $ 5000 from Baikal INC a USA Company,The conversion rate is 73 INR. Total value of commodity is 365000 in INR.
- In the above scenario Create a party ledger ‘ Baikal INC’ ,The country should be selected USA, in this case, make sure that you have not selected India as the country of service provider.
- Create a service ledger ‘Software development’ under direct or indirect expense based on the nature of usage of service in your business, In GST details reverse charges should be enabled.
Let’s input this import entry in purchase voucher as usual.
Accounting voucher> Purchase F9
If you view Tax analysis Alt+A, Tally automatically detect the entry is import & reverse chargeable. Import is treated as interstate sale and IGST is chargeable.
You can see the reverse charges liability to be booked in the GSTR-3B or GSTR-2 Report.
Display> Statutory Reports>GST> GSTR-3B
In the report, You can see
Reverse charge liability and input credit to be booked
- URD Purchases reverse charge tax liability 2160
- Reverse charge on inward supply ( purchases ) 125
- Import of services 65700.00
Let’s take the first case, The purchase from URD is eligible for ITC , Hence you have to book the tax payment liability & ITC. To do this.
Select The URD purchases and Hit enter, you will get a detailed report of the purchase from URD.
Tax liability & input tax credit booking of purchase from URD
Note down all liability or keep in mind, Click Alt + J or Stat adjustment button from the above screen.
You will get statutory adjustment option.
The nature of adjustment automatically selected, Increase the tax liability & input tax credit. This means from the all above reverse charge entry there was no tax is booked. You have to book these tax liability & input tax credit separately.
Hit enter Key.
For booking input tax credit, you should debit the following ledgers.
6 % 9000 CGST 540 ………. Dr
6% 9000 SGST 540………..Dr
9% 6000 CGST 540 ……….Dr
9% 6000 SGST 540………Dr
For booking GST Payable you should credit the following ledger with the taxable amount.
6 % 9000 CGST 540 ………. Cr
6% 9000 SGST 540………..Cr
9% 6000 CGST 540 ……….Cr
9% 6000 SGST 540……….Cr
Let’s book this in the statutory adjustment voucher.
How to make the payment of Tax payable on RCM
Let’s make the payment of tax, say paying on 01-05-2018 Urd purchase tax 2160
Go to payment voucher > Alt +S For making statutory payment.
Here is the payment voucher.
Now you can view the input tax credit in your balance sheet as minus balance in Tax liability.
Adjusting entry of Tax liability on Inward supply under reverse charge
The next one is booking of tax liability and ITC on inward supply. In GSTR-3B Place the cursor on Reverse charge inward supply Under Reverse charge liability and Input credit to be booked, Hit ENTER.
You will get the List of reverse charge supplies and tax liability summary.
Now press Alt+J or click on Stat Adjustment, the relevant option will appear automatically.
You have to create a ledger RCM u/s 9(3) under group current asset.
Save the voucher, Now you can see the RCM under sec 9 (3) ledger & it’s balance in Balance sheet.
Now let’s make payment of tax liability of inward supply
Go to payment Voucher > Stat payments Alt+S
Here is the payment voucher.
Hit enter & save
Booking of input tax credit of purchase under reverse charge
Journal voucher >Statutory adjustment.
Here is the adjustment entry
Now you look at the balance sheet, the ITC amount is increased by 125.
Adjusting entry of Tax liability on import of service under reverse charge
In GSTR-3B You can see the import of service is the only tax liability to be booked.
Hit enter, and go to details
click statutory adjustment to increase the tax liability to be booked, the relevant option automatically selected as shown below.
Here is the RCM on import tax liability booking entry
Tax payment entry of RCM under import
Payment voucher> Stat payment
ITC booking of RCM Import entry
Journal voucher > Stat Adjustment
Increase of input tax credit.
purchase under reverse charge
Save the screen. Now if you look at balance sheet, you can see all the input tax credit displayed in your balance sheet. And at the same time you have completed all tax payments and other tax compliances under GST reverse charge.
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