https://help.tallysolutions.com/docs/te9rel64/Tax_International/GCC_VAT/purchases_under_gcc_vat.htm

Recording GCC VAT Purchases

Related topics

Import of Goods

Import for Subsequent Sales

Purchase Returns

Input Tax Credit

After activating GCC VAT for your company, you can record different kinds of purchases such as domestic purchases, purchases from designated zones, purchases from unregistered dealers, purchase of capital goods, and so on.

Domestic purchase

Purchase from an unregistered dealer

Purchases within GCC countries

Purchase of capital goods

Purchase from designated zone

Domestic Purchase

The purchase of goods or services from a supplier in the same country will attract VAT rates as applicable for the goods or services. For example, a business located in Abu Dhabi can purchase goods or services from a supplier in Dubai, or any other emirates of UAE, such purchases from suppliers located in UAE is considered domestic purchase.

Record purchases from a domestic supplier

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

2. Specify the sales invoice no. and date received from the supplying party in the Supplier invoice no. and Date fields respectively.

3. In Party A/c name , select the supplier's ledger.

4. Select the purchase ledger applicable for local taxable purchases.

5. Select the required items, and specify the quantities and rates.

6. Select the VAT ledger.

You can view the tax details by clicking A : Tax Analysis . Click F1 : Detailed to view the tax break-up.

7. Press Ctrl+A to accept.

Purchase from an Unregistered Dealer

Purchases from unregistered dealers are exempt. You need to identify the party as an unregistered dealer.

Update the party ledger to identify unregistered dealers

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

2. Set the Registration type as Unregistered .

3. Press Ctrl+A to save.

Record purchases from an unregistered dealer

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

2. In Party's A/c Name , select the ledger of the unregistered dealer.

3. Select the purchase ledger created with Domestic Purchases - Unregistered as the Nature of transaction .

If you are using a common purchase ledger, then based on the party ledger, the nature of transaction is inferred as Domestic Purchases - Unregistered .

4. Select the stock item, and enter the quantity and rate.

5. Press Ctrl+A to accept.

Purchases within GCC Countries

If you are a registered dealer located in UAE and purchase goods or services from a registered or unregistered dealer in Saudi Arabia, then you have to pay tax on the purchases, based on reverse charge. You have to record a journal voucher to book tax liability and claim input tax credit for the liability booked and the tax paid.

Record purchases within GCC countries

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

2. In Party's A/c Name , select the supplier belonging to a GCC country.

3. Select the purchase ledger created with Intra GCC Taxable Purchases as the Nature of transaction .

4. Select the stock item, and enter the quantity and rate.

5. Press Ctrl+A to accept.

You can view the details of tax liability to be recorded for intra GCC purchases under reverse charge in the Reverse Charge Summary .

Record journal vouchers for reverse charge liability

1. Go to Gateway of Tally > Accounting Vouchers > F7: Journal .

2. Click J : Stat Adjustment .

o Select Increase of Tax Liability as the Nature of adjustment .

o In the Additional Details field, select the option Intra GCC Purchase .

o Press Enter to return to journal voucher.

3. Debit the expense ledger, or the ledger grouped under Current Assets .

4. Credit the VAT ledger for the tax on intra GCC purchase under reverse charge. Enter the tax Rate and Taxable Value in the VAT Details screen displayed.

5. Press Ctrl+A to accept the voucher.

Purchase of Capital Goods

When capital goods are purchased, the input tax can be claimed in the same voucher, or using a journal voucher.

Claim input credit fully in the purchase voucher

Partial claim of input credit in purchase voucher

Claim input credit using journal voucher

Purchase of fixed assets without claiming tax credit

To record purchase of capital goods by claiming VAT credit fully in the same voucher

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

2. Press Ctrl+V to switch to voucher mode.

o Press F12: Configure twice, set the option Allow expenses/fixed assets in purchase vouchers? to Yes .

o Press Ctrl+A to return to voucher screen.

3. Enter Supplier Invoice No. and Date .

4. Credit the party ledger and enter the amount.

5. Debit the fixed assets ledger (grouped under Fixed Assets and with Domestic Taxable Purchase - Capital Goods selected as the Nature of transaction ) and enter the taxable value.

The VAT Details screen appears with VAT Rate , Taxable Value and Tax Amount . The column Claim Credit will be set to Yes .

6. Press Enter to return to the voucher.

7. Debit the VAT ledger.

8. Accept the voucher.

To record purchase of capital goods with partial claim of input credit

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

2. Press Ctrl+V to switch to voucher mode.

o Press F12: Configure twice, set the option Allow expenses/fixed assets in purchase vouchers? to Yes .

o Press Ctrl+A to return to voucher screen.

3. Enter Supplier Invoice No. and Date .

4. Credit the party ledger and enter the amount.

5. Debit the fixed assets ledger (grouped under Fixed Assets and with Domestic Taxable Purchase - Capital Goods selected as the Nature of transaction ) and enter the taxable value.

The VAT Details screen appears with VAT Rate , Taxable Value and Tax Amount . The column Claim Credit will be set to Yes . Enter the Taxable Value on which input credit will be claimed.

6. Press Enter to return to the voucher.

7. Debit the VAT ledger and enter the tax credit that is partially being claimed.

8. Debit the expense ledger to account for the remaining amount of tax.

9. Accept the voucher.

To record purchase of capital goods to claim input credit in a separate voucher

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

2. Press Ctrl+V to switch to voucher mode.

o Press F12: Configure twice, set the option Allow expenses/fixed assets in purchase vouchers? to Yes .

o Press Ctrl+A to return to voucher screen.

3. Enter Supplier Invoice No. and Date .

4. Credit the party ledger and enter the amount.

5. Debit the fixed assets ledger (grouped under Fixed Assets and with Domestic Taxable Purchase - Capital Goods selected as the Nature of transaction ) and enter the taxable value.

The VAT Details screen, press Backspace on Taxable Value column, and set Claim Credit to No .

6. Press Enter to return to the voucher.

7. Debit the ledger grouped under Current Assets .

8. Accept the voucher.

Claim input credit on capital goods purchase in journal voucher

1. Go to Gateway of Tally > Accounting Vouchers > F7: Journal .

2. Click J : Stat Adjustment .

o Select Increasing Input Tax as the Nature of adjustment .

o In the Additional Details field, select the option Capital Goods .

o Press Enter to return to journal voucher.

3. Debit the VAT ledger for the tax on capital goods purchase. Enter the VAT Rate and Taxable Value in the VAT Details screen displayed.

4. Credit the ledger grouped under Current Assets that was used during capital goods purchase to account for input credit.

5. Press Ctrl+A to accept the voucher.

Record purchase of capital goods without claiming input credit

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

2. Press Ctrl+V to switch to voucher mode.

o Press F12: Configure twice, set the option Allow expenses/fixed assets in purchase vouchers? to Yes .

o Press Ctrl+A to return to voucher screen.

3. Enter Supplier Invoice No. and Date .

4. Credit the party ledger and enter the amount.

5. Debit the fixed assets ledger (grouped under Fixed Assets and with Domestic Taxable Purchase - Capital Goods selected as the Nature of transaction ) and enter the value of the asset.

6. In the VAT Details screen, press Backspace on Taxable Value column, and set Claim Credit to No .

7. Press Enter to return to the voucher.

8. Debit the expense ledger.

9. Accept the voucher.

Purchase from a Party in Designated Zone

Goods and services purchased by a party in mainland from a party located in designated zone are treated differently for taxation purpose.

VAT is applicable on reverse charge basis on Goods purchased from designated zone

VAT at 5% is applied on Services purchased from designated zone

In case of goods purchased, the purchasing company will record the tax liability in their books and claim input credit.

To help record transactions with party located in a designated zone, the following features are being provided in Tally.ERP 9.

New type of party – Designated Zone has been provided in party master to assign as party from designated zone.

New nature of transaction - Domestic Purchases – Designate Zone has been provided to record taxable purchases from a party in the designated zone.

When a transaction is recorded by selecting Domestic Purchases – Designated Zone as the Nature of transaction , Tally.ERP 9 will classify the transaction as taxable on reverse charge basis irrespective of whether goods or services are purchased.

However, if the nature of transaction is not selected Tally.ERP 9 will automatically classify it as taxable on reverse charge basis if goods are purchased and apply VAT at 5% in case of services.

Note: In case Domestic Purchases - Designated Zone is selected as the nature in transaction recorded for purchase of services from designated zone, the transaction will start appearing in the Reverse Charge Report .

Purchase of Goods from Designated Zone

Since reverse charge is applicable on purchase of goods from a registered party located in the designated zone, the purchase transactions will be listed in the Reverse Charge Report to help record tax liability for the taxable purchases.

Create a ledger for a supplier from a designated zone

1. In the Ledger Creation screen, click F12: Configure .

In the Master Configuration screen, enable the option Allow selection of type of party and press Ctrl+A to accept.

2. Enter the supplier name, select the group and provide other required details in the Ledger Creation screen.

3. Select the Registration type as Regular , and enter the Date of VAT registration and TRN under VAT Registration Details .

4. In the Type of party field, select the option Designate Zone .

5. Press Ctrl+A to accept.

Record purchase of goods from a designated zone

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

2. In Party A/c Name , select the ledger created for a supplier from a designated zone.

3. Select the purchase ledger created with Domestic Purchases – Designated Zone as Nature of transaction .

Note: When a common purchase ledger without any specific nature of transaction is selected in the invoice, Tally.ERP 9 will identify the transaction to be a purchase made from a designated zone, if the party ledger is created by selecting Regular as the Registration type and Designated Zone as the Type of party .

4. Select the purchased stock item, enter the quantity and rate.

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

o Press Esc to go back to the purchase voucher.

5. Press Ctrl+A to accept.

Record a journal voucher for tax liability on purchase from designated zone

1. Go to Gateway of Tally > Accounting Vouchers > F7: Journal .

2. Click J : Stat Adjustment .

o Select Increase of Tax Liability as Nature of adjustment .

o In the Additional Details field, select the option Purchase from Designated Zone .

o Press Enter to return to the journal voucher.

3. Debit the ledger grouped under Current Assets .

4. Credit the VAT ledger for tax on purchase from the designated zone under reverse charge. Enter VAT Rate and Taxable Value in the VAT Details screen.

5. Press Ctrl+A to accept the voucher.

Record a journal voucher to claim input credit for purchase from designated zone

1. Go to Gateway of Tally > Accounting Vouchers > F7: Journal .

2. Click J : Stat Adjustment .

o Select Increasing Input Tax as Nature of adjustment .

o In the Additional Details field, select the option Purchase from Designated Zone .

o Press Enter to return to the journal voucher.

3. Debit the VAT ledger for tax on purchase from the designated zone under reverse charge. Enter VAT Rate and Taxable Value in the VAT Details screen.

4. Credit the ledger created under Current Assets .

5. Press Ctrl+A to accept the voucher.

Record a journal voucher for tax liability and input credit in the same voucher

1. Go to Gateway of Tally > Accounting Vouchers > F7: Journal .

2. Click J : Stat Adjustment .

o Select Increase of Tax Liability and Input Tax Credit as Nature of adjustment .

o In the Additional Details field, select the option Purchase from Designated Zone .

o Press Enter to return to the journal voucher.

3. Debit the VAT ledger for tax on purchase from the designated zone under reverse charge. Enter VAT Rate and Taxable Value in the VAT Details screen.

4. Credit the VAT ledger for tax on purchase from the designated zone under reverse charge. Enter VAT Rate and Taxable Value in the VAT Details screen.

5. Press Ctrl+A to accept the voucher.

Purchase of Services from Designated Zone

In case of services purchased from designated zone VAT is applicable at 5%.

Record purchase voucher for services received from party in designated zone

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

2. Click I : Accounting Invoice to record the transaction in accounting invoice mode.

3. In Party A/c Name , select the ledger created for a supplier from a designated zone.

4. Under Particulars , Select the service ledger created with Domestic Purchases – Designated Zone as Nature of transaction .

5. Enter the value of services received under Amount .

6. Click A : Tax Analysis > F1 : Detailed to view the detailed Tax Analysis report that displays the VAT applicable at 5%. Press Esc to go back to the purchase voucher.

7. Press Ctrl+A to accept.