Reverse charges on GST

Deepak Baghel (Accountant) (74 Points)

18 November 2019

Hi Members,

I have a query, my client is an Individual and doing business in Internet industry. He need to pay some software payments to overseas where Reverse charge on GST is applicable. What will be the accounting treatment and GSTR-3B reporting?

I also have some clarification on it. Is is correct?

As per our audit report you have found that we do not have deposited the GST under reverse charge on payments made to overseas.

I would like to explain this in detail with the following example:-

If I paid Rs. 100 to facebook towards advertisement expenses and facebook is not registered in India

1	Facebook Dr	100		Liabiliyt created
	Facebook Dr	18
	To HDFC Bank Ltd.		100
	To IGST Liability		18

2	IGST Liability Dr	18		Liability Paid
	To HDFC Bak Ltd.		18	Liability Paid

3	IGST ITC Dr	18
	To Facebook		18

4	IGST payble Dr	18		It means I no need to pay Rs. 18 from my normal liability
	To IGST ITC		18	It means I no need to pay Rs. 18 from my normal liability

After passing above entries Facebook account will be nil with Rs. 18 and Liability of Rs. 18 will stand in books which we will pay from Bank

Once we will pay it from Bank, we will be eligible for taking INPUT of the same in the same month.

We can utilise this input to clear our any liability of GST except reverse charge

The problem was in accounting entries ( GST Liability under reverse charges was adjusted from INPUT Ledger instead of cash Ledger ) and we have paid GST Liability correctly which is also reflecting in our GST return