Hello Reader,

I am sure you must be aware of RCM transaction under GST. This article include detail information of RCM and recording RCM transaction in Tally.ERP9.




What is RCM ?

RCM refers to reverse charge mechanism which is applicable in certain cases of inward supply laid down by department. Under the case of RCM supplier of goods or supplier is not liable to collect GST where as recipient of goods or service need to pay GST on specific GST rate specified by department.

When RCM is applicable?
RCM is applicable on several cases as laid down by department. Initially when GST was introduce RCM was applicable on most of cases where as it has been revised and it is applicable on limited and few cases such as Legal Fee, GTA Service, Freight Service, Import of Goods, Import of Service etc.

Illustration : Let us take few simple example of RCM cases

  1.   ABC Info India Pvt ltd took legal service of “Gupta LLB & Company” for Rs 1,20,000. “Gupta LLB & Company” raised Invoice for the same. “Gupta LLB & Company” is not registered under GST hence they are not liable to collect Tax on such amount but as per rule laid down service receipeint i.e ABC Info India Pvt need to pay tax on such service @ 18%.(Ignore TDS)
  2.  ABC Info India Pvt Ltd imported one Factory machine for Rs 5,00,000  from Zuang Pte Ltd Singapore. They paid custom duty along with GST @ 18% to custom office on reverse charge mechanism basis.

Above 2 examples clearly state that service or goods recipient need to pay tax on both cases. It is important to know that Tax paid on such service or goods can be easily  claimed as Input Tax credit.
To record above transaction in Tally.ERP9 you can solve the issue by following steps

Illustration 1 – To solve the above you need to follow
  •   Creation of Party Master
  •   Creation of Legal Fee Exp with proper GST Configuration (Enable RCM Applicable for GST)
  •   Creation of GST Duty Ledger
  •   Recording Legal Fee Exp Entry
  •   Raising GST Tax Liability and Input Tax Credit
  •   Viewing GST Report
    Entry 1 - Booking Purchase Expenses (You can print this invoice as RCM Invoice)


Clcik on ALT+A Option to view Tax Analysis Option


Go to GSTR3B Report to check RCM Amount

To increase GST Liability and Input Tax credit record Journal Entry as below

Note - Input Tax credit can be used in same month at the same time RCM liability need to be paid.

Illustration 2- To Solve Import Goods entry you need to follow (To view video on Import Goods Solution click here)

  • Creation of Party Master
  • Creation of Stock item or Fixed Assets ledger of Machine
  •  Creation of GST Ledger
  • Creation of Import Purchase Ledger
  • Creation of other expense ledger such as Custom duty etc
  • Payment of GST and Custom duty
  • Raising Input Tax Credit and Liability

Recording Purchase Entry

Check GSTR3B Report

Raise Input Tax Credit and Liability using Journal Entry.

You can view video on same to check more detail.



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