Hello Readers,
Many of readers ask me how to book RCM Transaction in Tally is most appropriate way. Hence this article will be completely based on RCM transaction in Tally.

Before starting we will understand what is RCM in simple language?

What is RCM?
RCM refers reverse charge mechanism where recipient of goods or service on reverse basis. In this case supplier does not collect amount of Tax i.e GST and recipient him self has to  declare Tax amount and need to deposit to government.


Let us understand this with example

Example 1 :-
M\S ABC India Pvt Ltd (Supplier of Material) registered under GST supplied Goods toM\S Light Bright Pvt ltd (Buyer of Goods) who is also registered under GST.M\S ABC India Pvt Ltd raise Invoice for supply of goods as 20,000+18% GST = 23,600 RS
Now M\S Light Bright Pvt Ltd will pay Rs 23,600 to M\S ABC India Pvt Ltd which will include amount of Tax as well. In this case amount has been paid supplier and supplier has collected Tax amount as well which he will pay to Government.

So above example shows simple mechanism of GST where supplier collect Tax from Buyer and pay to government this method is called as Forward Mechanism (Opposite if RCM)

Example 2 :- Mr Amit is lawyer and have given service to M\S ABC India Pvt Ltd company. Mr Amit Shah is not registered under GST but M\S ABC India Pvt Ltd is registered under GST.
Now Mr Amit Shah Raised Invoice for Rs 50,000 for legal fee where he did not charged any GST amount. (As he is not registered under GST hence can not charge GST)
Now when Invoice was received by M\S ABC India Pvt Ltd without GST they need to identify the applicability of  GST on it as per GST law and rule. So as per GST rule in in this case buyer (M\S ABC India Pvt Ltd) need to pay GST@18% on Rs 50,000.
Now M\S ABC India Pvt Ltd will raise Liability of 9,000 Rs in books of account and will pay himself.

So above transaction state that supplier has not collected any Tax amount, but buyer or receipt need to declare, calculate and pay Tax on such amount.

So above example is called Reverse Charge Mechanism.
Which are the cases where RCM is applicable: -
Earlier it was applicable in each case where goods or service has been obtaining from Unregistered dealer. Later on it was amended and only few scenarios were included for RCM Transaction.

GST Department is going to release list of goods and items where Reverse Charge GST is going to applicable from 1st Feb 2019

Now Let’s have some Transaction case study on how to Book RCM entries in Tally

Case Study 1:- Purchase of Goods from Un-Registered Dealer
GST AND TALLY WALA Company made purchaseof following goods from Top-10 Mobile Supplier who is not registered under GST on 1st Jan 2019
  • Samsung Mobile 10 Pcs @ 5000 Rs each (GST Rate @18%)
  • Samsung Charge 10 Pcs @ 500 Rs each   (GST Rate @ 5%)
Case Study 2:- Service received from Un-Registered Dealer
GST AND TALLY WALA Company took service of Lalwani Associates for legal consultancy and received Invoice of Fee of Rs 50,000 on 2nd Jan 2019

Case Study 3 :- GST AND TALLY WALA took service of JK Transporter (Registered in GST) for delivery of goods and received bill for Transport Exp 20,000.  Even though JK Transporter registered under GST but as per GTA rule, Tax to be paid by recipient. So in case of RCM Tax need to be paid and born by GST AND TALLY WALA

Now as per above case studies we will see above entries step by steps

Following Steps we need to follow (Please note that Master Configuration not explained here so please read bottom paragraph of article to know about master configuration details)
Steps 1 :- Booking of expenses for all above case studies with explanation
Steps 2 :- Raising of Tax Liability along with Input Tax Credit
Steps 3 :- Payment of Tax Liability
Solets move to process of entries in Tally.ERP9

Steps 1- Case Study 1- Purchase of Goods from Un-Registered Dealer
Above entry shows Purchase of goods from Top-10 who is un-registered dealer. No need to select GST Ledger as GST is not being collected by Party.
(Master Configuration is not shown please refer my video on you tube for more details on master configuration)

Select following option in Tax Classification option
You can click on ALT+A >> Tax Analysis >> to view the detail of GST >>




Case Stuy2 : Now second case study is about that company took service of Lawyer for Fee of 50,000 Rs where Tax need to be paid by RCM basis. Check out the expense booking entry in Tally






(Please note that master configuration not shown above please refer my you tube video link is given at bottom of article)
Case Study 3- Booking of Transport Expense entry from Registered dealer under RCM




Step 2: Now we will see entry of booking of Liability and Input Tax Credit
Before booking entry we can see GSTR3B Report





To book Liability and ITC entry we can pass journal entry from Gateway of Tally

Gateway of Tally>> Accounting Voucher >>Journal >> Press ALT+S >> Stat Adjustment >>



Above entry has refers that Input Tax credit and liability has been raised together. We need to understand that liability raised under RCM need to be paid and can not be adjusted. ITC raised under RCM can be used in same month but not against the liability of RCM but can be use against other liability.


Similarly we can raise lability for all cases shown above.

After raising Tax Liability we can see GSTR3B report as below



No further liability need to be raised.
Step 3 : Payment of GST Liability under RCM

Go to Payment Voucher >> Click on stat payment >>




Now as we have shown above how to process transaction of RCM in Tally.
We have not seen explanation of master in Tally you can refer my you tube video about explanation on the same
https://youtu.be/kOULr1FUu8I

I would also like to update that we have not covered Cash and other type transaction on RCM. I would suggest you to go for E-Book on GST and Tally which will cover lot more details and in-depth detail of Topic.
To know the full content of  E-Book click here

To download tha pdf on RCM - CLICK HERE

Regards,
GST AND TALLY WALA