Lesson 52 - Reverse Charge with Service Tax Percentage in Tally.ERP9

Reverse Charge with Taxable Percentage 

Through This tutorial you can learn about Reverse Charge entry in Tally.ERP9 and enable to compute tax liability on reverse charge service tax.

Example: On 23-11-2012 ABC Company availed building renovation services worth Rs.5,00,000 from R.B.Co. Taxable Percentage of the service is 60% and tax liability of the service provider is 50%.

To record the above transaction,

1. Create the Service Provider Ledger

2. Create the Service Ledger

3. Record the Transaction in Purchase Voucher

4. Record the Payment Voucher (to account the payment)

5. Record a Journal Voucher (to create Service Tax liability)

 

1. Create Service Provider Ledger

Go to Gateway of Tally - Accounts Info. - Ledgers - Create

In the Ledger Creation screen:

·       Enter the Name of the Party Ledger e.g. R.B. Co.

·       Select Sundry Creditors from the List of Groups displayed 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

o    Registration Number and Date of Registration (This is  not mandatory).

o    Type of Classification: In this field select the classification that is applicable for the service provider. For R.B. Co., Not Applicable is selected from the list of Classifications. 

 

·         Enter the Mailing Details and Tax Information

·         Press Enter to accept and save. 

2. Create Service Ledger

Go to Gateway of Tally - Accounts Info. - Ledgers - Create

·         Enter the Name of the service expense Ledger you wish to create, for e.g., Building Renovation 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 Works Contract Service from the List of Service Categories.

·         Press Enter to save. 

3. Record purchase of Services

To record the purchase of services,

Go to Gateway of Tally - Accounting Vouchers - F9: Purchase

1.       Press F2 and change the date to 23-11-2012

2.       In Party A/c Name field select R.B. Co.

3.       Under Particulars, select Service Ledger - Building Renovation Services and press Enter to view Service Tax Details screen.

4.       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/14-1 which can be changed by the user.

·         In Type of Service field service type  - Input Credit will be displayed by default, as the classification chosen in for R.B. Co. is Not Applicable. Press Backspace and select Reverse Charge.

·         In Category/Service field the service category selected in the Service Ledger will be defaulted. Press Enter to view the Taxable Percentage screen

·         In Taxable Percentage field, enter 60%

·         In Tax Liability % (Service Provider) field, enter 50%

 

·         Service Amount: In this field enter the Service Amount of Rs. 5,00,000

·         Amount (Incl. of Tax): The amount specified in the Service Amount field plus Service Tax payable on the amount, will be displayed in this field.

 5.              Accept Service Tax Details screen

In the Voucher Creation screen, 

6.               In Amount field Service Amount of Rs. 5,00,000 will be displayed 

7.               Select Service Tax Ledger e.g. Service Tax @ 12%. Service Tax amount will be calculated and displayed automatically. 

8.             Select Education Cess Ledger e.g. Education Cess @ 2%. Education Cess amount will be calculated and displayed automatically. 

9.            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.

10.          In Bill-wise Details screen

·         In Type of Ref select New Ref

·         In Name field enter the bill number - Bill-0579

·         Amount will be defaulted automatically

 

11.                Accept the Bill-wise Details screen.

 

                    The completed Purchase Voucher is displayed as shown: 

12.                Press Enter to Accept the Voucher Creation

4. Record the payment voucher (to account the payment

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

1.       Press F2 and change the date to 24-11-2012

2.       In Debit field select R.B. Co. Ledger and press Enter to view Service Tax Details screen

3.       In Service Tax Details screen

·         In Type of Ref field select Agst Ref

·         In Name field select Purc/14-1 dated 23-11-2012 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.

4.       In Bill-wise Details screen

·         In Type of Ref field select Agst Ref

·         In Name field select Bill-0579 to adjust the pending bill against the payment

 

                In the Voucher Creation screen,

5.       Rs. 5,18,540 will be defaulted in Amount field for R.B. Co.

6.       In Credit field select Canara Bank. Rs. 5,18,540 will be defaulted in Amount field

7.       Press Enter to view the Bank Allocations screen. Fill in the required details and press Enter to save the Bank details. The completed Payment Voucher is displayed as shown:

 

8.      Press Enter to save and accept. 

5. Record a Journal Voucher (to Create Service Tax Liability)

To create Service Tax liability on work contract services, create the Voucher Class in Journal Voucher.

To record the transaction,

Go to Gateway of Tally -Accounting Vouchers - F7: Journal

1.      In Change Voucher Type screen, in Class field select Service Tax Adjustments from                Voucher Class list

2.       Press F2 and change the date to 24-11-2011

3.       In Used for field select Tax on Reverse Charge from the list of Service Tax     Adjustments

 

4.       Press Enter to view Tax on Reverse Charge screen to calculate Service Tax liability

5.      In Service Tax Liability screen

·      In Till Date select the Voucher date to account all services purchased till the date of accounting the Service Tax liability. By default Voucher Date 24-11-2012 will be displayed.

·      In Service Category field select the service received - Works Contract Service from the List of Service Categories.

·      Avail Input Credit: Set this option to Yes to consider the Service Tax amount paid towards the works contract services.

·     In Party Ledger field select the party from whom services are received - R.B. Co. from the List of Ledger Accounts

·     In Output Ledgers section select

o    Service Tax @ 12% to account Service Tax

o    Education Cess @ 2% to account Education Cess

o    Secondary Education Cess @ 1% to account Secondary and Higher Education Cess

·     In Input /Expense Ledgers section select

o    Service Tax @ 12% to account Service Tax

o    Education Cess @ 2% to account Education Cess

o    Secondary Education Cess @ 1% to account Secondary and Higher Education Cess

 

6.   On accepting the Service Tax Liability screen, Tally.ERP 9 Auto fills the details in Journal Voucher

 

 7.      Press Enter to save and accept.

On payment of Service Tax to the Government, the tax paid towards works contract 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