# Reverse Charged Tax Codes

**URL:** <https://forum.manager.io/t/reverse-charged-tax-codes/26867>\
**Category:** Uncategorized\
**Created:** [February 13, 2020, 5:15am UTC](https://forum.manager.io/t/reverse-charged-tax-codes/26867 "2020-02-13T05:15:03Z")\
**Posts on this page:** 4\
**Page:** 1

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**Author:** ![sharpdrivetek](https://sea1.discourse-cdn.com/flex019/user_avatar/forum.manager.io/sharpdrivetek/32/34244_2.png) [@sharpdrivetek](https://forum.manager.io/u/sharpdrivetek)\
**Post date:** [February 13, 2020, 5:15am UTC](https://forum.manager.io/t/reverse-charged-tax-codes/26867/1 "2020-02-13T05:15:03Z")

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hello @lubos

I have a few questions and possibly some suggestions to improve the reverse charged tax codes.

1. why is there no option to enter a multi rate reverse charged tax code?  
in our jurisdiction the taxes are split between the centre and state governments. therefore, we need to charge them separately just like our regular tax codes.

2. the reverse charged amount does not reflect anywhere as a liability on the _Summary_ page. this would be very useful for majority of users.  
an extract from the guide:  

for this purpose a suggestion would be to have an automatic subaccount for reverse charge created to the default tax control account.

to illustrate an example, considering _Tax payable_ as the default control account and _RCM_ as a subaccount to _Tax payable_:

A) before reverse charge payment to tax authority  
Tax payable: 100 Dr  
RCM: 25 Cr

B) after reverse charge payment to tax authority  
Tax payable: 125 Dr  
RCM: 0

1. Implementing the above would also help showing the transaction in _Tax Transactions_ report where currently the tax amount is not reported.

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**Author:** ![lubos](https://sea1.discourse-cdn.com/flex019/user_avatar/forum.manager.io/lubos/32/62798_2.png) [@lubos](https://forum.manager.io/u/lubos)\
**Post date:** [February 14, 2020, 2:32am UTC](https://forum.manager.io/t/reverse-charged-tax-codes/26867/2 "2020-02-14T02:32:24Z")

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Reverse charged tax codes are 0% tax codes from accounting point of view.

You correctly claim that reverse charged tax code do not reflect anywhere on balance sheet but then you propose some entries being made into G/L after all.

What am I missing?

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**Author:** ![sharpdrivetek](https://sea1.discourse-cdn.com/flex019/user_avatar/forum.manager.io/sharpdrivetek/32/34244_2.png) [@sharpdrivetek](https://forum.manager.io/u/sharpdrivetek)\
**Post date:** [February 14, 2020, 4:34am UTC](https://forum.manager.io/t/reverse-charged-tax-codes/26867/3 "2020-02-14T04:34:59Z")

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> [@lubos](#):
>
> Reverse charged tax codes are 0% tax codes from accounting point of view.

this is true. but since the reverse charged taxes are a method to increase tax compliance, these are still tax transactions which need to be reported. and the present implementation do not report these tax values on any report except the _Tax Summary_.

> [@lubos](#):
>
> You correctly claim that reverse charged tax code do not reflect anywhere on balance sheet but then you propose some entries being made into G/L after all.

yes. because as explained in my initial post, our tax laws do not allow us to offset the reverse charged taxes with our regular input credits and neither can we claim input of the reverse charged tax until we pay the same to the authorities.  
this is explained in first paragraph on page 2  
[http://cbic.gov.in/htdocs-cbec/gst/Reverse%20charge%20Mechanism.pdf](http://cbic.gov.in/htdocs-cbec/gst/Reverse%20charge%20Mechanism.pdf)

so as per above, a taxpayer need to pay the reverse charged taxes from their pocket rather than offsetting the same with his available input credit. for the same reason this needs to be shown as a liability in Manager. after the reverse charges are paid, it would be available as an input credit which can be utilized normally.

if you find the time you can read an article explaining most things related to reverse charges in our jurisdiction [https://taxguru.in/goods-and-service-tax/reverse-charge-mechanism-gst-regime-chart.html](https://taxguru.in/goods-and-service-tax/reverse-charge-mechanism-gst-regime-chart.html)

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**Author:** ![Ealfardan](https://sea1.discourse-cdn.com/flex019/user_avatar/forum.manager.io/ealfardan/32/63166_2.png) [@Ealfardan](https://forum.manager.io/u/Ealfardan)\
**Post date:** [January 18, 2023, 2:56pm UTC](https://forum.manager.io/t/reverse-charged-tax-codes/26867/4 "2023-01-18T14:56:44Z")

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Closed on January 18, 2023, 2:56pm UTC