Recording a Transaction for Reducing Tax Liability

You can record a journal voucher to capture the reduction of tax liability due to prior payments.

To create journal voucher to reduce tax liability

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

Note: You can create a journal voucher from Gateway of Tally > Display > Statutory Reports > VAT > select the VAT or CST form.

2. Click J: Stat Adjustment. In the Stat Adjustment Details screen,

o Select the option VAT in the Type of duty/tax field.

o Select the option Reducing Tax Liability in the Nature of adjustment field.

o Select the option Entry Tax in Additional Details field.

Note: The options for Additional Details are provided as per state specific requirements of VAT/CST forms and annexures. In this example, Bihar is selected as the State.

o Press Enter to save and return to voucher screen.

3. Debit the VAT ledger, and enter the relevant details in the VAT Details screen.

4. Enter the amount in the Debit column.

5. Credit the ledger grouped under Current Assets.

6. Set the option Provide VAT Details? to Yes, and enter the relevant details.

Note: The option Provide VAT Details? is provided as per state specific requirements of VAT/CST forms and annexures. In this example, Bihar is selected as the State.

7. Enter Narration, if required. The journal voucher appears as shown below:

8. Press Enter to save.

The states with Input Tax Credit Admitted On Capital Goods available as the Nature of Adjustment are given below:

State Name	Nature of Adjustment	Additional Details	Voucher Entry
Bihar	Reducing Tax Liability	Advance Tax Paid	Debit: VAT ledger or ledger grouped under Current Liabilities. Credit: Ledger grouped under Current Assets.
Bihar	Reducing Tax Liability	Entry Tax	Debit: VAT ledger. Credit: Ledger grouped under Current Assets.
Chhattisgarh	Reducing Tax Liability	Adjusting with ITC	Debit: VAT ledger. Credit: VAT ledger.
Chhattisgarh	Reducing Tax Liability	Adjusting with ITC of Capital Goods	Debit: VAT ledger. Credit: VAT ledger.
Gujarat	Reducing Tax Liability	Entry Tax	Debit: VAT ledger. Debit: Additional tax ledger. Credit: Ledger grouped under Current Assets.
Jharkhand	Reducing Tax Liability	Entry Tax	Debit: VAT ledger. Credit: Ledger grouped under Current Liabilities.
Kerala	Reducing Tax Liability	Entry Tax	Debit: VAT ledger. Credit: Ledger grouped under Current Assets.
Madhya Pradesh	Reducing Tax Liability	Adjusting with ITC	Debit: VAT ledger. Credit: Ledger grouped under Current Liabilities.
Maharashtra	Reducing Tax Liability	Adjustment of Tax As Per Form 234	Debit: CST ledger. Credit: Expense ledger.
		Entry Tax	Debit: VAT ledger. Credit: Expense ledger.
		Entry Tax on Motor Vehicle	Debit: VAT ledger. Credit: Expense ledger.
		TCS Adjustment	Debit: VAT ledger. Credit: Ledger grouped under Current Assets.
Puducherry	Reducing Tax Liability	Advance Tax	Debit: VAT ledger. Credit: Ledger grouped under Current Assets.
Puducherry	Reducing Tax Liability	Refund	Debit: VAT ledger. Credit: Ledger grouped under Current Assets.
Punjab	Reducing Tax Liability	Advance Tax Deducted	Debit: VAT ledger. Debit: Surcharge ledger. Credit: Ledger grouped under Current Assets.
		Advance Tax Paid	Debit: VAT ledger. Debit: Surcharge ledger. Credit: Ledger grouped under Current Assets.
		Entry Tax	Debit: VAT ledger. Credit: Ledger grouped under Current Assets.
Uttar Pradesh	Reducing Tax Liability	Adjusting with ITC	Debit: VAT ledger. Credit: Ledger grouped under Current Liabilities.