[Feature Proposal] [GST India] Reverse Charge Mechanism

ERPNext
1

Reverse Charge Mechanism for Purchase and Sales Invoice.
For the use case (samples defined below) following are the propositions to verify with community and Accounts Masters,

GST Setting will have an additional settings for user to define (Tax Assets) Account Ledgers,

  • Input CGST - RCM
  • Input SGST - RCM
  • Input IGST - RCM
  • IGST - Refund

Then we will modify the Purchase Tax and Sales Tax Templates and add certain (missing) actions as follows,

Action PI - Ledger Posting & GSTR2 Purchase Invoice - Print SI - Ledger Posting & GSTR1 Sales Invoice - Print
Add “Add” works as your Assets . Will print both Tax % and Tax amount at actual. “Add” which works like your liability. Will print both Tax % and Tax amount at actual.
Deduct “Deduct” works as your liability. Will print both Tax % and Tax amount at actual. “Deduct” should work like your “Assets” Will print both Tax % and Tax amount at actual.
View Doesn’t affect the ledger entries at all. Will print both Tax % and Tax amount at actual. Doesn’t affect the ledger entries at all. Will print both Tax % and Tax amount at actual.
View as 0 Doesn’t affect the ledger entries at all. Will help just to view both Tax % at actual and Tax amount (will be 0) Doesn’t affect the ledger entries at all. Will help just to view both Tax % at actual and Tax amount (will be 0)

“View” and “View as 0” is moreover to comply with statutory requirement to print information to intimate Sender or Receiver of consignment about tax payment.

Once Tax Templates are set then we will have specific Templates with respect to various cases that arise as per Sales and Purchase which is as follows (some samples),

Sales Invoice

GST Invoice Type Export Type RCM Transaction Type Sales Template Name
Regular Not Applicable No B2B In State GST
  • Ledger Entries to be configured
    • Add Output CGST - Credit Entry
    • Add Output SGST - Credit Entry
  • Line item level print config
    • For Add entries we will show Tax % and Tax Amount in Print
  • Line item level Tax % : Yes
  • Line item level Tax Amount : Yes
  • Add Tax total to Net Total : Yes
  • Tax total in Print : Yes. Show in Print like
    • CGST = Total CGST Amount
    • SGST = Total SGST Amount


GST Invoice Type Export Type RCM Transaction Type Sales Template Name
Regular Not Applicable Yes B2B In State GST - Under RCM
  • No Ledger Entries to be configured
  • Line item level print config
    • For Add entries we will show Tax % and Tax Amount in Print
  • Line item level Tax % : Yes
  • Line item level Tax Amount : Yes
  • Add Tax total to Net Total : No
  • Tax total in Print : Yes. Show in Print like
    • CGST = Total CGST Amount
    • SGST = Total SGST Amount


GST Invoice Type Export Type RCM Transaction Type Sales Template Name
SEZ With Payment of Tax No B2B ISEZ/Export with GST
  • Ledger Entries to be configured
    • Add IGST Refund - Debit Entry
    • Add Output IGST - Credit Entry
  • Line item level print config
    • For Add entries we will show Tax % and Tax Amount in Print
  • Line item level Tax % : Yes
  • Line item level Tax Amount : Yes
  • Add Tax total to Net Total : No
  • Tax total in Print : Yes. Show in Print like
    • IGST (Zero Rated Supply) = Total IGST Amount


GST Invoice Type Export Type RCM Transaction Type Sales Template Name
SEZ Without Payment of Tax No B2B SEZ/Export without GST
  • No Ledger Entries to be configured
  • Line item level print config
    • View as 0 - Output IGST - Show Tax % and keep Tax Amount = 0
  • Line item level Tax % : Yes
  • Line item level Tax Amount : No
  • Add Tax total to Net Total : No
  • Tax total in Print : Yes. Show in Print like
    • IGST (Zero Rated Supply) = Total IGST Amount


Purchase Invoice

GST Invoice Type Export Type RCM Transaction Type Sales Template Name
Regular Not Applicable Yes (Buying from GTA) B2B In State GST - Under RCM
  • Ledger Entries to be configured
    • Add Input SGST RCM - Debit Entry
    • Add Input CGST RCM - Debit Entry
    • Add Output CGST RCM - Credit Entry
    • Add Output SGST RCM - Credit Entry
  • Add Tax total to Net Total : No
  • Tax total in Print : No
  • ITC Eligibility : Yes
    • CGST - ITC
    • SGST - ITC

Please, do help us validate the use case in terms of implementation and guidelines with respect to current capabilities of Accounts Module.

8 Likes
2

Hi,

Nice Initiative.

My Comments:

  • Instead of “View as 0”, can we think of using “View” with “Zero Tax Template”.

To add to more smart features, I will propose some additions in following post.

1 Like
3

Thanks Smit for your comment.

After a PoC and review at code we have following updates.

We will have “View” as an option on Tax Templates. On selection user has further selection like

  1. N/A – Which means No Ledger entry, Not to be considered for Total but to use for View and Print.
  2. Show Amount as ZERO or may be as you suggested “Zero Tax Template” – Here provision is Tax % to be shown as is but Amount deliberately to be shown as ZERO.
  3. Post Ledgers – Which means, Not to be considered to be added to Total, Not to be printed but Ledgers will be booked against Invoice Issuer (Case of Tax Refund).

GitHub issue is expected to be created soon on similar line.

4

I feel it would be unnecessary complication.

  • This is the objective of View Template. Can be kept as default.
  • This can be achieved with “Zero Tax Template” and “View”.
  • We shall be already using “Deduct” (for refund). Again using “View” + “Post Ledgers” to “print hide” (for tax refund) is confusing.
  • When looking for compliance, under disclosure is a problem and not extra disclosures.
  • Having this as an additional line in the invoice as “Less: Refund Receivable” should not be an issue. It would make it more clear.

edit: I feel minimum additions/ as required additions will make it more universal code. I therefore see no added output from this addition of further options.

1 Like
5

Got it.

:slight_smile:

Great. Thanks for suggestions. Will review this entirely.

1 Like
6

Suggestions

  1. Templating GST Details. Say if we have the template for “SEZ without payment of tax” it will make appropriate selections automatically.
  2. Customer/Supplier GST Status (say, registered/sez/unregistered).
  3. Add additional fields to Tax Rule for GST status, “Is Transporter?” so that tax template can be wisely automatically chosen.
  4. Also configuring GST Details template, to get chosen automatically.
  5. Adding GST setting of preference for Export/Sale to SEZ
    • With payment of tax
    • Without payment of tax under Bond/LUT.

Eg: for Purchase Invoice

  1. Supplier is Transporter - Registered/Unregistered - Home State - Priority 1
    • Tax Template: In State GST under Reverse Charge
    • GST Details: Reverse Charge
  2. Supplier is Transporter - Registered/Unregistered - Other State - Priority 2
    • Tax Template: Out of State GST under Reverse Charge
    • GST Details: Reverse Charge
  3. Supplier is Unregistered - Home State - Priority 3
    • Tax Template: In State GST under Reverse Charge
    • GST Details: Reverse Charge
  4. Supplier is Registered - Home State - Priority 4
    • Tax Template: In State GST
    • GST Details: Regular

and so on…

Similarly for Sales Invoice,

Say, Sale to the customer with GST Status as SEZ,
Tax Template: Based on GST setting of with/without payment of tax.
GST Details: Accordingly.

1 Like
7

Once we export the goods, we get some incentives from Customs / GST / extra or we claim IGST paid against exports. How to make accounting entry and payment entry for these refunds and incentives. ?