Reverse Charge is paid by the service receiver. 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.
|
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% |
On 17-06-2016, 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 enable reverse charge
● Go to F11: Features > Statutory & Taxation.
o Set Define Service Category and tax details as masters? to Yes.
o 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.
For purchase ledger for reverse charges, ensure that you
1. Select Purchase Accounts in the field Under.
2. Set Is service tax applicable? as Yes.
3. Enable Set/alter service tax details?
4. Select the required Service Category which should have the following options defined:
● Service Tax Details, as required.
● Is reverse charge applicable? set to Yes.
● Reverse Charge percentage defined.
The completed Service Category Creation screen appears as shown below:
6. Enter 2,00,000 in the field Amount.
7. Select service tax, Swachh Bharat cess and Krishi Kalyan cess ledgers. The values are automatically calculated and displayed.
8. Click A: Tax Analysis. Click F1: Detailed to view the service tax details.
9. Press Esc to return to purchase invoice.
10. Enter Narration, if required.
The purchase invoice appears as shown below:
11. Press Enter to save.
To record a journal voucher for payment of reverse charge:
1. Go to Gateway of Tally > Display > Statutory Reports > Service Tax Reports > Form ST3.
2. Select the company from the List of Tax Units.
3. Go to Service Tax Payable - Receiver's Liability.
4. Click S: Stat Payment.
5. Select Service Tax as Tax Type.
6. Define the Period from and To.
7. Select Receipt Liability as Payment Type.
8. Press Enter to return to voucher.
9. Enter the amount for service tax, swachh bharat cess and krishi kalyan cess manually.
10. Press Enter the save.
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