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Purchase of Goods and Services under Reverse Charge Mechanism (RCM) in Tally.ERP9

Reverse Charge Mechanism (RCM) , is a system wherein the liability to pay tax on a transaction to the Government is on the recipient.

Reverse charge mechanism in GST is applicable in the following 3 scenarios:

  • Supply of notified goods and services

  • Imports

  • Purchase from unregistered dealers

Reverse charge mechanism in GST is applicable in the following 3 scenarios:

  • Details of outward supply of notified goods and/or services, on which tax is to be paid by the recipient on reverse charge basis, should be furnished in Form GSTR-1

  • Details of inward supplies on which tax is to be paid by you on reverse charge basis should be furnished in Form GSTR-2

Supply of notified goods and services

Certain goods and services have been notified, on receiving which, the recipient has to pay tax as reverse charge under GST to the Government. Certain reverse charge mechanism in GST examples are - Cashew nut in shell, bidi wrapper leaves, and tobacco leaves.

Imports

When one imports goods and/or services, one will have to pay tax under reverse charge mechanism to the Government on the import, as per the rate applicable to the goods and/or services. On the value of the goods or services imported, customs duty will be levied separately, as it is not subsumed under GST . On the basic price + customs duty, IGST will be levied.

Purchase from unregistered dealers

When one purchases taxable goods and/or services from unregistered dealers, one will have to pay tax under reverse charge mechanism to the Government on the supply. This will be at the rate applicable to the goods and/or services. Note that this reverse charge is not applicable if the aggregate value of purchases from unregistered dealers does not exceed INR 5,000 in a day.

Reverse Charge details in returns

Reverse charge mechanism in GST is applicable in the following 2 cases :

  • Details of outward supply of notified goods and/or services, on which tax is to be paid by the recipient on reverse charge basis, should be furnished in Form GSTR-1

  • Details of inward supplies on which tax is to be paid by you on reverse charge basis should be furnished in Form GSTR-2

In case of Tally.ERP9 , Under Reverse Charge, you can account for Advance Payments, Inward Supply of Taxable Services, Cancellation of Advance Payments, and Purchase Returns.

The transaction details are captured in GSTR-2 and GSTR-3B report.

The following 6 Stpes should be followed under this Reverse Charge System in Tally.ERP9 :

Step-1 : Setup or Configure of 'Stock Items' under Reverse Charge in Tally.ERP9

Step-2 : Setup or Configure Purchase Ledger - (Services) under Reverse Charge in Tally.ERP9

Step-3 : Purchase of Items & Goods under Reverse Charge in Tally.ERP9

Step-4 : Purchase of Services under Reverse Charge in Tally.ERP9

Step-5 " Reverse Charge GST Liability and Claim Input Tax Credit in Tally.ERP9

Step-6 : Payment of GST Liablility under Reverse Charge (Recipient Liability) in Tally.ERP9

Step-1 : Setup or Configure of 'Stock Items' under Reverse Charge in Tally.ERP9

1.  Go to Gateway of Tally > Inventory Info. > Stock Items > Create / Alter > select the stock item.

2.  GST applicability.

  • Is GST Applicable? - Applicable .
  • Set/alter GST details? - Yes .

3.  Set GST Details .

  • Press F12: Configure and set Enable reverse charge calculation? to Yes .
    Press F12: Configure and set Enable reverse charge calculation
    (Fig-69)
  • Taxability - Taxable .
  • Is reverse charge applicable? - Yes .
  • Enter the GST rates.

Setup or Configure of 'Stock Items' under Reverse Charge in Tally.ERP9
(Fig-70)

Note: If a reverse chargeable service is created as a stock item, set the option Is reverse charge applicable? to Yes in the GST Details screen of stock item.

  • Enter the GST rates.

4.  Save the stock item.

Step-2 : Setup or Configure Purchase Ledger - (Services) under Reverse Charge in Tally.ERP9

1.  Go to Gateway of Tally > Accounts Info. > Ledgers > Create / Alter > select the purchase ledger.

Setup or Configure Purchase Ledger - (Services) under Reverse Charge in Tally.ERP9
(Fig-71)

2.  GST applicability.

  • Is GST Applicable? - Applicable .
  • Set/alter GST details? - Yes .

3.  GST details.

  • Press F12: Configure and set Enable reverse charge calculation? to Yes .

Press F12: Configure and set Enable reverse charge calculation

  • Taxability - Taxable .
  • Is reverse charge applicable? - Yes .
  • Enter the GST rates.

Setup or Configure Purchase Ledger - (Services) under Reverse Charge in Tally.ERP9
(Fig-72)

Note: If a reverse chargeable service is created as a stock item, set the option Is reverse charge applicable? to Yes in the GST Details screen of stock item.

  • Enter the GST rates.

4.  Save the purchase ledger.

Step-3 : Purchase of Items & Goods under Reverse Charge in Tally.ERP9

Example :

Purchase 5 Unused Cars of Rs. 1,35,000 each from Aditya Sales which attract Reverse Charge

1.  Go to Gateway of Tally > Accounting Vouchers > F9: Purchase .

2.  Enter the details as required.

Purchase of Goods under Reverse Charge in Tally.ERP9
(Fig-73)

  • Click  : Tax Analysis > F1  : Detailed to view the detailed Tax Analysis report that displays the reverse charge amount.

Tax Analysis : Purchase of Goods under Reverse Charge in Tally.ERP9
(Fig-74)

3.  Press Enter to save.

Step-4 : Purchase of Services under Reverse Charge in Tally.ERP9

Example :

Received a Bill from M.S. Agency toward Transporation Charges (by road) of Rs.1,25,500 towards shiftment of 5 Unused Cars to our location.

1.  Go to Gateway of Tally > Accounting Vouchers > F9: Purchase .

2.  Enter the details as required.

Purchase of Services under Reverse Charge in Tally.ERP9
(Fig-75)

  • Click  : Tax Analysis > F1  : Detailed to view the detailed Tax Analysis report that displays the reverse charge amount.

Tax Analysis - Purchase of Services under Reverse Charge in Tally.ERP9
(Fig-76)

3.  Press Enter to save.

Step-5 " Reverse Charge GST Liability and Claim Input Tax Credit in Tally.ERP9

1.  Go to Gateway of Tally > Display > Statutory Reports > GST > GSTR-3B .

2.  Press Enter on Reverse Charge Inward Supplies . You can raise the tax liability for the amount shown in this report.

Reverse Charge GST Liability and Claim Input Tax Credit in Tally.ERP9
(Fig-77)

3.  Click : Stat Adjustment .

Stat Adjustment - Reverse Charge GST Liability and Claim Input Tax Credit in Tally.ERP9

(Fig-78)

4.  Debit and credit the tax ledgers.

Journal Voucher for Debit and Credit Tax Ledger under Reverse Charge in TallyERP9.jpg"
(Fig-79)

5.  Press Enter to save.

Step-6 : Payment of GST Liablility under Reverse Charge (Recipient Liability) in Tally.ERP9

1.  Go to Gateway of Tally > Accounting Vouchers > F5: Payment .

2.  Click : Stat Payment and enter the required details as shown.

Payment of GST Liablility under Reverse Charge
(Fig-80)

Payment Type: Set the type of payment as Recipient Liability .

3.  Account : Select the bank from which the payment will be made.

4.  Select the central and state tax ledgers.

5.  Provide GST details: Enable this option to enter the bank details. If the bank details are not available, you can enter them later in the Challan Reconciliation report.

6.  In the Bank Allocations screen, select the ledgers, enter the amount and provide the payment details.

Payment Voucher of GST Liability under Reverse Charge in TallyERP9
(Fig-81)

7.  Press Enter to save.

GST Payment Voucher with Late Fee, Penalty and Others to GST Department in TallyERP9 GST Using Tally.ERP9 GST Reverse Charge on Advance Received from Customer against Sale in Tally.ERP9 (If Turnover is more than Rs.1.5 Crores)


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