Accounting for RCM Transactions under GST

1.       Liability of GST under Reverse Charge Mechanism:

Tax would be payable by Recipient:

(a)    Section 9(3): On supply of goods or services or both notified by Govt. (Supplier may be Registered or Unregistered, But Recipient will be liable to pay the Tax)

(b)   Section 9(4): On supply of goods or services or both made by unregistered supplier.*

*Exemption: Consolidated Supply upto Rs. 5000/- per day. (This Exemption is only for Section 9(4)).

2.  Accounting:

Customize chart of accounts. Create new group under Sundry Creditors – URD Vendors and open account of all unregistered vendors under this group. It would help in generation of related reports later.

    (a) When Total Supply from Un registered Dealer for Taxable Items is upto Rs. 5000/- in a day :

Here will do usual entries. I recommend, do single entry for all expense for the day.

e.g. Cost of Stationery : Rs. 2000/-

Eatables : Rs. 1500/-

Electricity Repair Work Rs. 1000/-

Total Rs. 4500/-

Entry would be:

Printing & Stationery A/c Dr Rs. 2000/-

Staff Welfare Exps A/c Dr Rs. 1500/-

Office Repair & Maintenance A/c Dr Rs. 1000/-

                To Vendor for Printing & Stationery A/c Rs. 2000/-

                To Vendor for Eatables Supply A/c Rs. 1500/-

                To Vendor for Repair & Maint. A/c Rs. 1000/-

     (b) When Total Supply from Un registered Dealer for Taxable Items is above Rs. 5000/- in a day :

In such case, you can post separate entries or a single entry, it is a choice, but I’ll recommend a single Entry:

Cost of Stationery : Rs. 3000/-

Eatables : Rs. 1500/-

Electricity Repair Work Rs. 1000/-

Now Total Exps are Rs. 5500/-

Entry would be:

Printing & Stationery A/c Dr Rs. 3000/-

Staff Welfare Exps A/c Dr Rs. 1500/-

Office Repair & Maintenance A/c Dr Rs. 1000/-

Tax on Reverse Charges (Input) – SGST A/c Dr Rs. 495/-

Tax on Reverse Charges (Input) – CGST A/c Dr Rs. 495/-

                To Vendor for Printing & Stationery A/c Rs. 3000/-

                To Vendor for Eatables Supply A/c Rs. 1500/-

                To Vendor for Repair & Maint. A/c Rs. 1000/-

                To Output SGST on RCM Payable A/c Rs. 495/-

                To Output CGST on RCM Payable A/c Rs. 495/-

After making payment of RCM, Pass the JV to Claim ITC, paid under RCM:

Output SGST Payable A/c Dr Rs. 495/-

Output CGST Payable A/c Dr Rs. 495/-

                To Tax on Reverse Charges (Input) – SGST A/c Rs. 495/-

    To Tax on Reverse Charges (Input) – CGST A/c Rs. 495/-

NB: If you are using Tally, You have to enter these entries thru Purchase Voucher, so that same can be appeared in Statutory (GST) Reports. Here, In each Expense Line, You have to classify, Unregistered Purchase – Taxable or Exempt.

-          Sukhvinder Singh Bhatia

  Mail: sukhgst@gmail.com