Reverse charge Mechanism under GST in Tally
Before we go futher we should have some idea about what is reverse charge mechanism under GST .
You can account for purchase of taxable services classified as reverse charge, purchases against advance paid towards these services, and cancellation of purchase after the advance payment is made.
To record purchase of services under reverse charge, you need to update your purchase ledger.
Purchase of taxable services under reverse charge
Inward supply > Raise tax liability > Pay tax and file returns
ledger is to account for the purchase of services under reverse charge.
To create a ledger for purchase of services under reverse charge
Suppose service of Rs 10.000 purchase from M/s Govind enterprises
1. Go to Gateway of Tally > Accounts Info. > Ledgers > Create.
2. Under – Purchase Accounts.
3. Is GST Applicable? – Applicable.
4. Set/alter GST details? – Yes.
Nature of transaction – Purchase Taxable.
- Tax ability – Taxable.
- Is reverse charge applicable? – Yes. Press F12: Configure and set Enable reverse charge calculation? to Yes.
- Set the rate details.
Recording a purchase of taxable service under reverse charge
Create a new bill reference when you are purchasing taxable services and then making a payment. If you have made an advance payment, then you can adjust it against the purchase invoice.
To record a purchase entry
Go to Gateway of Tally > Accounting Vouchers > Accounting Vouchers > F9: Purchase.
Enter the details as required.
Recording a journal voucher to reverse the tax liability raised for purchase of services under reverse charge to claim tax credit
When you have made the advance payment in previous period and created the purchase invoice in the current period, you can view the transaction details in GSTR-2 report.
You can claim the tax paid on purchase of services under reverse charge as tax credit by recording a journal voucher, and can view the tax credit claimed in GSTR-2.
To view the tax liability under reverse charge in GSTR-2
1. Go to Gateway of Tally > Display > Statutory Reports > GST > GSTR-2.
The purchase invoice values with the tax liability details.
example for Revese charge mechanism
Rahul (based in uttarakhand) provides Consultancy Services to Sachin (based in Delhi ) and charges Rs. 40,000 for the same. Rajat is not registered under GST but Sachin is registered. Would the provisions of Reverse Charge apply in this case.
In the above mentioned case, as Mr. Rahul is providing an inter-state service, he would be required to mandatorily get registered under GST. Without getting registered – he cannot provide inter-state service. Only registered persons can provide inter-state service.
Note : Reverse Charge provisions would not be applicable if the of such supplies of goods or services or both received by a taxable person from any or all the suppliers, who are not registered, does not exceed Rs. 5,000 in a day