Raise Tax Liability & Claim ITC for Import of Services [Under GST RCM] in TallyPrime

When you import services from outside India, GST is applicable under Reverse Charge Mechanism (RCM).

This means the recipient (you) is liable to pay GST directly to the government and then claim ITC if eligible.

TallyPrime helps you account for this entire process—from recording the service expense to raising tax liability and claiming ITC.

Let’s break it down step by step with an example.

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1. Example: Import of Services under GST RCM in TallyPrime

You have imported a software license from a company in the USA.

• Invoice Value: ₹50,000
• IGST @ 18% = ₹9,000
• Total Cost = ₹59,000

Since this is an import of services, you will:

1. Pay IGST of ₹9,000 under RCM
2. Record the service expense
3. Claim ITC on ₹9,000 (if eligible)

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2. Step-by-Step Process to Raise Tax Liability & Claim ITC for Import of Services [Under GST RCM] in TallyPrime

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Step 1: Enable GST and Reverse Charge in TallyPrime

• Press F11 > F3: Statutory & Taxation
• Enable GST: Yes
• Enable Reverse Charge: Yes
• Set Set/Alter GST details: Yes
• Enter your GST details and press Ctrl + A to save

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Step 2: Create Necessary Ledgers

a. Create Expense Ledger (for service)

• Name: Imported Software Service
• Under: Purchase Accounts or Indirect Expenses
• GST Applicable: Yes
• Type of Supply: Services
• Taxability: Taxable
• Is Reverse Charge Applicable: Yes

b. Create Tax Ledger

• Name: IGST – RCM
• Under: Duties & Taxes
• Type of Duty/Tax: GST
• Tax type: Integrated Tax
• Percentage: 18%
• Is Reverse Charge Applicable: Yes

c. Create a Party Ledger (optional)

You can create a ledger for the foreign vendor or use a general expense ledger. Since this is an import, the party won’t have a GSTIN.

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Step 3: Record the Journal Voucher to Raise Tax Liability

1. Go to Vouchers > press F7: Journal
2. Press F2 to change the date
3. Enter the following:

Debit

• Imported Software Service – ₹50,000
• IGST – RCM – ₹9,000

Credit

• Foreign Vendor (or Bank if paid) – ₹50,000
• Reverse Charge Payable (create a current liability ledger) – ₹9,000

This voucher books the expense and records the IGST liability.

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Step 4: Pay IGST via Payment Voucher

You must pay IGST in cash (not via ITC). To do this:

1. Go to Vouchers > F5: Payment
2. Debit: Reverse Charge Payable – ₹9,000
3. Credit: Bank/Cash – ₹9,000

Now, your IGST under RCM is paid.

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Step 5: Record ITC Claim via Journal Voucher

If you’re eligible to claim ITC, record another journal:

Debit

• Input IGST – ₹9,000 (create under Duties & Taxes, tax type: Integrated Tax)

Credit

• IGST – RCM – ₹9,000

This means: you have claimed ITC for the IGST already paid under reverse charge.

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Step 6: View in GST Returns

• GSTR-3B
  • Tax liability under RCM will show under 3.1(d)
  • ITC claim will show under 4(A)(3)
• GSTR-2A/2B: These transactions won’t appear because it’s a reverse charge; you self-declare it in returns.

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3. Summary: Raise Tax Liability & Claim ITC for Import of Services [Under GST RCM] in TallyPrime

To manage RCM on imported services in TallyPrime:

1. Enable GST and Reverse Charge
2. Create proper ledgers
3. Use journal vouchers to:
   • Book the expense and raise IGST liability
   • Claim ITC (if eligible)
4. Pay IGST using a payment voucher

TallyPrime ensures these entries are properly reflected in your GST reports and returns.

Let me know if you want sample voucher screenshots or a test company template for practice.