When an Indian business receives services from a supplier located outside India, it is treated as an import of services under GST.
Even though no physical goods are coming in, the business must pay GST under Reverse Charge Mechanism (RCM).
In TallyPrime, you can easily record such inward remittances for services and ensure the correct GST liability is accounted for.
Let’s understand how this works in simple steps with examples.
1. What is Inward Remittance of Service in TallyPrime?
Inward remittance refers to receiving money or services from a foreign supplier.
For example, if you hire a consultant in the USA or use a foreign software subscription like Adobe or Zoom, this is a service import.
Under GST rules, you (the Indian receiver) must pay IGST on such imports, even if the foreign party doesn’t charge GST.
2. When is GST Applicable on Inward Remittance of Services in TallyPrime?
GST is applicable when:
- The supplier is located outside India
- The recipient is located in India
- The place of supply is in India
- The transaction qualifies as a ‘supply’ under GST
This is treated as an import of service and IGST is payable by the recipient under RCM.
3. How to Record GST on Inward Remittance of Services in TallyPrime
Let’s go through the steps.
Step 1: Enable Reverse Charge in TallyPrime
- Go to F11 > Statutory & Taxation
- Set Enable Goods and Services Tax (GST) to Yes
- Set Enable Reverse Charge Mechanism to Yes
Step 2: Create a Ledger for the Foreign Supplier
- Go to Gateway of Tally > Accounts Info > Ledgers > Create
- Name: ABC International
- Under: Sundry Creditors
- Country: United States
- GST Registration Type: Not Applicable
Step 3: Create a Service Ledger
- Name: Consulting Services (Import)
- Under: Purchase Accounts
- Is GST Applicable: Yes
- Set Nature of Transaction: Import of Services
- Set GST Rate: Example – 18% IGST
Step 4: Create Tax Ledgers
- IGST – Under Duties & Taxes, Type: IGST, Percentage: 18%
Step 5: Record the Journal Voucher
- Go to Gateway of Tally > Accounting Vouchers > F7: Journal
- Press Alt + J to mark it as a Reverse Charge transaction
- Debit: Consulting Services (Import) – ₹1,00,000
- Debit: IGST Ledger – ₹18,000
- Credit: ABC International – ₹1,00,000
- Credit: GST Payable or Reverse Charge Payable A/c – ₹18,000
This entry ensures the expense and tax liability are both recorded correctly.
4. Example Scenario: GST on Inward Remittance of Service Value in TallyPrime
You hire a graphic designer in Canada for ₹50,000.
- No GST is charged on the invoice
- You must pay IGST @ 18% = ₹9,000 under RCM
- In TallyPrime:
- Service Value: ₹50,000
- IGST under RCM: ₹9,000
This gets posted through a journal entry with reverse charge mode enabled.
5. How to Claim Input Tax Credit (ITC) for GST on Inward Remittance of Service Value in TallyPrime
You can claim the IGST paid under RCM as ITC in the same month if:
- The service is used for business
- You have paid the IGST
TallyPrime automatically shows this in GSTR-3B – ITC Available under RCM.
6. Benefits of Recording GST on Inward Remittance of Service Value in TallyPrime Properly
- You stay compliant with GST laws
- You avoid penalties for non-payment of IGST on imports
- You can claim ITC and reduce your tax outflow
- Audit trail is clear and traceable
7. Conclusion
GST on inward remittance of service value must be paid by the recipient in India under reverse charge.
TallyPrime makes it easy to track such transactions using journal entries and correct ledger setups.
By following the simple steps above, you can ensure you are fully compliant, claim ITC, and maintain accurate records for GST reporting.
Leave a Reply