GST Regular Dealer Purchase from Unregistered Dealer in Tally

GST Regular Dealer Purchase from Unregistered Dealer

When a registered buyer purchases taxable goods / services from unregistered seller (who do not charge Tax in the invoice, as he is unregistered), the registered buyer would pay the Tax under Reverse charge, on such purchase and would be entitled to claim Input Tax Credit on the Tax so paid.

Company GST  Set up for the for GST Reverse Charge Liability in Tally

At GoT, click F11:Feature>Statutory Feature to get Statutory Features set up screen . At Enable Tax Liability under Reverse Charge (Purchase from Registered Dealer), set Yes to enable Reverse Charge for Purchase from Registered Dealer.

Company Features Statutory details set up in Tally

GST set up for Stock Item Master in Tally

Create Stock Item Master as usual, setting the GST Rates. For Taxable Items, select Taxable and enter the Tax rate. Enter Cess Rate if applicable.

GST Set up for Taxable Stock Item Master in Tally

GST Set up for Taxable Stock Item Master in Tally

GST details Set up for Taxable Stock Item Master in Tally

GST details Set up for Taxable Stock Item Master in Tally

GST Set up in Stock Item for NIL Rated GST in Tally

GST Set up in Stock Item for NIL Rate Tax in Tally

GST details Set up for NIL rated GST in Stock Item in Tally

GST details Set up for NIL rated Tax in Stock Item in Tally

For NIL rated Items, select NIL rated at Taxability .

GST set up for Supplier Ledger Account in Tally

Create Ledger Account of unregistered supplier (GoT>Accounts Info>Ledger>Create). At State, select the State of the unregistered party .

GST Set up for Unregistered local Supplier (within State) account master in Tally

GST Set up for Unregistered supplier ledger account master in Tally

GST details Set up for Unregistered local supplier (within State) ledger account master in Tally

GST details set up for Unregistered supplier  Ledger account master in Tally

GST details screen, at Registration Type, select Unregistered

GST details set up for Unregistered Inter state supplier Ledger account master in Tally

GST Set up for Regular Dealer for Purchase Ledger Account in Tally

Create of Purchase Ledger Account (GoT>Accounts Info>Create) to get Ledger Account screen. At Under, select Purchase Account.

GST set up for  Regular Dealer for Purchase Ledger account Master in Tally

Statutory Information set up for Purchase Ledger Account : You may set a common Purchase Ledger Account for Purchase from Registered or Unregistered Party, within or Outside state, to keep the Ledger Accounts fewer and simpler. To use such common Purchase Account, at Purchase Ledger Account creation screen , set No at Set Alter GST details. Consequently, you will not set up GST GST details (Nature of Transaction, Taxability or GST Rate) at purchase ledger account (such info will be set up at Stock Item / Invoice). This will reduce the number of Ledgers and transaction entry would be simple and uniform.

Still, if you set Yes at set Yes at Set Alter GST details,  at GST details screen, at Nature of transaction, set Not Applicable from the list .

GST details set up Purchase ledger Account Master in Tally

Consequently, during Purchase Voucher entry, you will need to select the Nature of Transaction, as explained later.

GST Nature of Purchase list in Tally

Invoice entry for Purchase from Unregistered Dealer in Tally

Purchase from local unregistered dealer in Tally

Invoice entry for registered dealer Purchase from Unregistered Dealer Tax Analysis

If Nature of Transaction is not specified at GST Details screen in the selected Purchase Ledger, specify the type of transaction in Purchase Voucher entry. To get the Classification pop up screen at Purchase Voucher entry screen,

GST Purchase Invoice entry Configuration in Tally

Click F12:Configure and set Yes at Allow Modification of Tax details for GST.

GST Purchase Invoice entry Configuration in Tally

Consequently, a pop up screen will appear to select Classification / Nature of transaction during voucher entry to properly reflect the transaction in GSTR reports and placed under the respective subheads.

GST Tax Classification set up in Voucher in Tally

On selection of Tax Classification, at Tax Details are modified message, type Y to Accept the entry , to avoid conflict to be resolved before GSTR Return filing.

GST Voucher saving options in Tally

Though no tax entry has been entered in the Invoice (as the Invoice has been raised by Unregistered Dealer), tally senses the type of Purchase from the GST details of supplier (Registration type & State), and classified the transaction accordingly. Tax is internally computed showing the applicability of Reverse charge at Tax Analysis details.

However, Tax liability is not reflected in Balance Sheet, but reflected in GSTR-2, as per details shown in Tax Analysis, after Purchase Voucher entry.

Effect of Purchase from Unregistered Dealer Reverse Charge Tax liability in GSTR-2 in Tally

As the Purchase is from unregistered dealer, there would be no tax charged in the Invoice. However, the Tax Analysis (Click A:Tax Analysis) would show Tax details and a note that the Tax is under Reverse charge. This would be shown in GSTR-3B as Liability created, yet to be booked.

Reverse Charge Liability Accounting in Tally

On purchase from unregistered dealer, a liability for Reverse Charge is to be created.

Create Ledger Account for Tax on Reverse Charge & then a Journal Voucher to make adjustment entry to create the Reverse Charge Liability

GST Set up for Reverse Charge Ledger Account in Tally

Create Reverse Charge liability Ledger Account (GoT>Accounts Info>Ledger>Create) under Current Asset. It is used to create the liability of Reverse Charge and then subsequently relinquished on adjustment of input credit. Finally, the balance of this account would be Nil when the Reverse Charge is paid to the Government and the corresponding input credit is adjusted

GST Set up for Reverse Charge Ledger Account in Tally

GST Reverse Charge Accounting in Tally

Having created the Purchase voucher, create a Journal Voucher in usual way (GoT>Accounting Voucher> F7:Journal), to create Reverse Charge Liability .

At Journal Voucher, select Tax on Reverse Charge ledger account and enter the GST Reverse Charge amount in Debit column and credit the respective Tax Accounts (CGST/SGST or IGST as the case may be), as per GSTR-3B report. Enter the Rate & Taxable Value in pop up screen and then enter the amount in main voucher (the computed amount as per Taxable Value & Rate is not carried in the voucher and you have to type it).

Journal Voucher for GST Reverse Charge Accounting in Tally

At Journal Voucher entry screen, click J:Stat Adjustment button

GST Voucher entry button bar in Tally

GST Stat Adjustment set up for Reverse Charge in Tally

At Stat Adjustment entry screen, at Type of Duty / Tax, select GST.

At Nature of Adjustment, select Increase of Tax Liability and Input Tax Credit.

Nature of Adjustment list in Stat Adjustment for GST Reverse charge in Tally

At Additional Details, select Purchase from Unregistered Dealer.

Stat Adjustment details set up for  GST Reverse charge in Tally

Alternatively, At GSTR-3B Report Click S:Stat Adjustment to get Statutory Adjustment screen and Journal Voucher creation screen, as described.

This Journal Voucher would be reflected in GSTR-3B as Eligible Input Credit

Effect of Purchase entry in GSTR & in Accounts

  • Effect in GSTR-3B Report : This would be reflected in GSTR-3B, under List of Purchases from Unregistered Dealer, as Liability to be booked.
  • Effect in Balance Sheet: At this stage, in Balance Sheet (GoT>Balance Sheet), only the Sundry Debtors is reflected in Accounts, without reflecting any liability for reverse charge.

The creation of Tax Liability is would be reflected in GSTR-3B report

Effect of Tax Liability on Reverse Charge in GSTR-3B in Tally

You can drill down to lower level to view the list of vouchers leading to such Reverse Charge.

GST Reverse Charge liability details for Inward supply in GSTR-3B in Tally

In Tally ERP 9 Rel 6.4, you may create a single Journal Voucher in place of Journal Voucher and , debiting and crediting The Tax Accounts (CGST / SGST), as explained in Chapter Reverse Charge Mechanism. In that case, at Stat Adjustment , at Nature of Adjustment, select Increase of Tax Liability & Input Tax Credit, and at Additional Details, select Purchase from Unregistered Dealer. The single voucher would make adjustments for creation of Liability and also Input tax Credit.

Payment  of GST Reverse Charge to government

Now the liability has to be extinguished by paying the Tax to Government. Create a Payment Voucher (GoT>Accounting Voucher>F5:Payment) for Payment of Reverse Charge Tax Liability.

GST Reverse Charge Payment  Voucher entry in Tally

Click S:Stat Payment button to get Statutory Payment screen.

Stat payment details for Reverse Charge Tax Payment Voucher in Tally

 Now enter as follows :

  • Tax Type : At Tax Type select GST
  • Period : At period, enter the Range of Accounting Month period for which Tax is being deposited (irrespective of Date of Payment).
  • Payment Type : Select Recipient Liability for payment of Reverse charges on account of purchase from Unregistered Dealer.

Now you get back to the main voucher screen. At Provide GST Details, type Yes to get Bank Details screen.

Bank Derails for Reverse charge GST Payment in Tally

Enter the respective details as available. Write Narration and save the voucher

Accounting for Input Tax Credit in Tally

Having paid the Tax for Reverse Charges, create a Journal Voucher to avail the Input Credit. This entry would be reverse to Journal Voucher for creation of ITC liability, discussed earlier.

Input CreditAdjustment Voucher for Reverse charge in Tally

Select the Tax Accounts and enter the amount in debit columns. Select Tax on Reverse Charge Account and enter the amount in credit columns.

The balance of the Tax Accounts and the Tax on Reverse Charge Ledger Account created for the purpose, would become Nil when all adjustments are complete.

Click A: Stat Adjustment button to get Stat Adjustment screen.

Stat Adjustment for Reverse Charge on Purchase from URD in Tally

At Type of Tax, select GST. At Nature of Adjustment, select Reversal of Input Credit from the list .

List of Nature of Adjustment for  Reverse Charge for URD Purchase in Tally

At Additional details, select Purchase from Unregistered Dealer.

Additional Details for Reverse Charge Adjustment for URD Purchase in Tally

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