Reverse Charge - Service Tax being paid by service receiver instead of Service Provider is already practiced in case of GTA transactions and Import of Services.
With effect from 01-07-2012, few more service categories have been included under Reverse Charge. Under this approach, for the payment of Service Tax, Service receiver cannot claim the general exemption of 10 lakhs.
Under this scheme new services with partial reverse charges are introduced. Where the service provider and receiver are liable to pay Service Tax in prescribed ratio
Example: Full & partial reverse charge services
Description of Services |
% of Service Tax payable by the Service Provider |
% of Service Tax payable by the Service Receiver |
Transportation of goods by road |
Nil |
100% |
Sponsorship Services |
Nil |
100% |
Supply of manpower or security agencies |
25% |
75% |
Works Contract |
50% |
50% |
Using Tally.ERP 9 users can account all the reverse change services.
Example: ABC Company received services from Vibha Security Agency for Rs. 1,54,635. While raising the invoice service Provider has charged Service Tax on 25% of the Services. On 75% of the assessable value, ABC Company has to calculate Service Tax payable to the government.
To record the above transaction
1. Create the Service Provider Ledger
2. Create the Service Ledger
3. Record the Transaction in Journal/Purchase Voucher (to account the expenses)
4. Record the Payment Voucher (to account the payment)
5. Record a Journal Voucher (to raise Service Tax liability)
Go to Gateway of Tally > Accounts Info. > Ledgers > Create
In the Ledger Creation screen:
Enter the Name of the Party Ledger e.g. Sri Road Transporters.
Select Sundry Creditors from the List of Groups in the Under field.
Set Maintain balances bill-by-bill to Yes.
Enter the Default Credit Period, if required.
Set Is Service Provider/Receiver to Yes.
Set the option Set/Alter Service Tax Details to Yes and press enter to view Service Tax Details screen
In Service Tax Details screen enter
Registration Number and Date of Registration (This is not mandatory).
Type of Classification: In this field select Reverse Charge from the list of Classifications.
Enter the Mailing Details and Tax Information
Press Enter to accept and save.
Go to Gateway of Tally > Accounts Info. > Ledgers > Create
Enter the Name of the service expense ledger you wish to create, for e.g., Security Services
Select Indirect Expenses as the group name in the Under field.
Set Inventory values are affected to No.
Set Is Service Tax Applicable to Yes.
In Default Service Category field select Taxable Service from the List of Service Categories.
Note: As per Circular No. 165/16/2012-ST, w.e.f. November 20, 2012, service-specific accounting codes have been restored. For transactions recorded on and after the 20th of November, 2012, the appropriate service category has to be chosen. For more details, click here.
Press Enter to save.
To record the Purchase Voucher
Go to Gateway of Tally > Accounting Vouchers > F9: Purchase
Press F2 and change the date to 2-11-2012
In Party A/c Name field select Vibha Security Agency
Under Particulars, select Service Ledger - Security Services and press enter to view Service Tax Details screen.
In Service Tax Details screen
In Type of Ref field select New Ref from the Method of Adjustment.
In Name field accept the default reference Number displayed Purc/13-1 which can be changed by the user.
In Type of Service field service type - Reverse Charge selected in party ledger will be defaulted.
In Category/Service field the service category selected in the Service Ledger will be defaulted.
Press F12: configure and enable the option Allow to override Service Category during entry to Yes and save.
Note: As per the new Reverse Charge system, on Security Services Service Provider is liable to pay tax on 25% of the assessable Value while raising the invoice. On the remaining 75% of the Assessable Value the service receiver is liable to pay tax.
Press backspace key to navigate to Category/Service field and press Enter to view Taxable Percentage screen.
Enter 100% in Taxable Percentage field
In Tax Liability % (Service Provider) field, enter 25%
Note: In Release 3.7, Tax Liability of service provider has to be specified in Taxable Percentage field:
The provision to specify taxable percentage as well as the tax liability of the service provider in Taxable Percentage screen is available from Release 4.5 onwards.
Service Amount: In this field enter the Service Amount of Rs. 1,50,000
Amount (Incl. of Tax): The amount specified in Service Amount field plus Service Tax will be displayed in this field.
Note: Service Tax is Calculated on 25% of the Assessable Value i.e. 37500.
In Amount field Service Amount of Rs. 1,50,000 will be displayed
Select Service Tax Ledger e.g. Service Tax @ 12%. Service Tax amount will be calculated and displayed automatically.
Select Education Cess Ledger e.g. Education Cess @ 2%. Education Cess amount will be calculated and displayed automatically.
Select Secondary and Higher Education Cess Ledger e.g. Secondary Education Cess @ 1%. Secondary and Higher Education Cess amount will be calculated and displayed automatically.
In Bill-wise Details screen
In Type of Ref select New Ref
In Name field enter the bill number - Bill-0568
Amount will be defaulted automatically
The completed Purchase Voucher is displayed as shown:
Press Enter to save and accept
Note: Reverse Change transactions will be displayed in Tax on Services Received report when accounted.
Once the purchase transaction is recorded, the extent of input credit available can be viewed in the Input Credit Summary report.
On reverse charge transactions Service Tax liability on the service receiver arises only on making the payment to the service provider.
Go to Gateway of Tally > Accounting Vouchers > F5: Payment
Press F2 and change the date to 5-11-2012
In Debit field select Vibha Security Agency ledger and press enter to view Service Tax Details screen
In Service Tax Details screen
In Type of Ref field select Agst Ref
In Name field select Purc/13-1 dated 2-11-2012 to adjust the Pending Tax Bills
Based on the tax bill selected Type of Ref, Category, Amount (Incl. of Tax) and Service Amount will be defaulted.
In Bill-wise Details screen
In Type of Ref field select Agst Ref
In Name field select Bill-0568 to adjust the pending bill against the payment
Rs. 1,54,635 will be defaulted in Amount field.
In Credit field select Canara Bank
The completed Payment Voucher is displayed as shown:
Press Enter to save and accept.
The liability of tax towards Security services will arises only on payment to the service provider.
To create Service Tax Liability on Security services, create the Voucher Class in Journal Voucher. To create voucher class refer - Create the Voucher Class in Journal Voucher
To record the transaction,
Go to Gateway of Tally > Accounting Vouchers > F7: Journal
In Change Voucher Type screen, in Class field select Service Tax Adjustments from Voucher Class list
Press F2 and change the date to 5-11-2011
In Used for field select Tax on Reverse Charge from the list of Service Tax Adjustments
Press Enter to view Tax on Reverse Charge screen to calculate Service Tax liability
In Service Tax Liability screen
In Till Date select the Voucher date to account all the reverse charge services purchased till the date of accounting the Service Tax liability. By default Voucher Date 5-11-2012 will be displayed.
In Service Category field select the service received from the List of Service Categories.
Note: You can select the option Any to consider all those service categories which are received on which service receiver is liable to compute the Service Tax liability.
Avail Input Credit: Set this option to Yes to consider the Service Tax amount paid towards the security services as Input Credit for further adjustment
In Party Ledger field select the service provider - Vibha Security Agency from the List of Ledger Accounts
Note: You can select the option Any to consider all those parties from whom the reverse charge services are received compute the Service Tax liability.
In Output Ledgers section select
Service Tax @ 12% to account Service Tax
Education Cess @ 2% to account Education Cess
Secondary Education Cess @ 1% to account Secondary and Higher Education Cess
Note: In Output Ledgers section Service Tax ledgers are selected to compute (calculate) and create the Service Tax liability (to be payable) on the security services purchased .
In Input /Expense Ledgers section select
Service Tax @ 12% to account Service Tax
Education Cess @ 2% to account Education Cess
Secondary Education Cess @ 1% to account Secondary and Higher Education Cess
On accepting the Service Tax Liability screen, Tally.ERP 9 Auto fills the details in Journal Voucher
Press Enter to save and accept.
On payment of Service Tax to the Government, the tax paid towards security services will be displayed in Input Credit Summary Report.
To view the Input Credit Summary report,
Go to Gateway of Tally > Display > Statutory Reports > Service Tax Reports > Input Credit Summary
