PAYING RCM AND AVAILING INPUT ON TRANSPORT CHARGES REGARDING

Respected Sir,

Please explain if we pay RCM if 5% on transport charges and avail input on the same,
how should we pass the journal entry in our books of accounts.
Replies (2)
Quick Summary
This discussion explains the accounting treatment for paying Reverse Charge Mechanism (RCM) on transport charges and simultaneously availing input tax credit. It provides a clear journal entry structure for recording both the RCM payment and the subsequent claim of input tax credit. An example is included to illustrate the process, ensuring accurate financial reporting.

Journal Entry for RCM on Transport Charges When paying Reverse Charge Mechanism (RCM) on transport charges and availing input tax credit: -

 *RCM Payment*: - *Debit*: Transportation Expenses (net of GST) - *Debit*: Input Tax Credit (ITC) - CGST/SGST/IGST (5% of transport charges) -

*Credit*: GST Payable (CGST/SGST/IGST) (5% of transport charges) -

*Credit*: Cash/Bank (Total amount paid, including GST) - *Input Tax Credit*: -

 *Debit*: GST Payable (CGST/SGST/IGST) -

*Credit*: Input Tax Credit (ITC) - CGST/SGST/IGST Example Assuming transport charges are ₹100, and RCM is 5%: -

 *RCM Payment*: - *Debit*: Transportation Expenses ₹95 -

*Debit*: Input Tax Credit (ITC) ₹5 -

*Credit*: GST Payable ₹5 -

*Credit*: Cash/Bank ₹100 -

*Input Tax Credit*: - *Debit*: GST Payable ₹5 -

*Credit*: Input Tax Credit (ITC) ₹5 Accounting Treatment -

*Transportation Expenses*: Record the net transportation expenses (excluding GST) in the profit and loss account. -

*Input Tax Credit*: Claim the input tax credit in your GST returns and utilize it to offset GST liabilities. By passing these journal entries, you can accurately record the RCM payment and input tax credit in your books of accounts.

Thank you sir

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register