SmartLedger works out the GST on every purchase invoice from its place of supply and each line's GST rate, and posts it to your input tax accounts. For purchases under reverse charge, one setting on the bill changes how that GST is treated.
How GST is worked out on a bill
- Place of Supply decides the split. When it is your company's state, each line shows CGST and SGST. When it is another state, it shows IGST.
- Enter the rate in each line's GST(%) column, and add CESS where it applies. A discount given before tax reduces the value GST is charged on.
- For an import or a foreign vendor, choose International as the place of supply. The GST columns are replaced by Tax/VAT and Other Taxes.
When you save the bill, the GST posts to your Input CGST, Input SGST, Input IGST and Input Cess accounts. There is no separate ITC setting on the bill. The Claim ITC option you may see when recording a payment applies only to GST on bank charges.
Mark a bill as reverse charge
- Create or edit the purchase invoice.
- In the right-hand panel, find Reverse Charge Applicable? and choose Yes.
- Enter the lines and their GST rates as usual.
- Click Create Invoice or Update Invoice.
What reverse charge changes
- The GST still shows on each line and in the totals, but it is left out of the bill's TOTAL. You owe the vendor the value without GST, and pay the GST to the government yourself.
- Instead of input tax, SmartLedger posts the GST to reverse-charge accounts in pairs, such as RCM Input IGST - Not Due and RCM Output IGST - Tax Payable (or the CGST and SGST equivalents).
Rules to know
- Reverse charge needs an Indian place of supply. With International selected, you'll see "RCM is not available when place of supply is International." For services bought from an overseas vendor under reverse charge, use your own state as the place of supply.
- Reverse charge and TDS can't be used on the same bill. Choosing Yes switches TDS off, and while TDS is on the reverse charge options are disabled.
- Once the bill is Paid or Partially Paid, you can't change the reverse charge setting.
- A bill created from a purchase order keeps the order's reverse charge setting.
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