Reverse Charge

Reverse Charge is paid by service receiver instead of service provider.

With effect from 01-07-2012, some 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 a prescribed ratio.

Example: Full & partial reverse charge services.

On 16-11-2015, 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 a reverse charge transaction, define the following options in company's F11: Features > Statutory & Compliance:

●      Set Define Service Category and tax details as masters? to Yes.

●      Set Is Reverse Charge Applicable? to Yes.

The reverse charge details can be defined in the Service Category Master.

To record a reverse charge transaction

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

2.     Enter the Supplier Invoice No.

3.     Enter the Date for invoice.

4.     Select Vibha Security Agency in the field Party's A/c Name.

5.     Select the purchase ledger under Particulars.

6.     Enter 200000 in the field Amount.

7.     Select duties and taxes ledger. The service tax and Swachh Bharat cess rate will get calculated automatically.

8.     Click A: Tax Analysis. Click F1: Detailed to view the tax breakup of the two service category.

9.     Press Enter to save.

10.  Enter Narration, if required.

The purchase invoice appears as shown below:

11.  Press Enter to save.