QuickBooks now has an option to let businesses based in Kerala handle the Kerala Flood Cess that went into effect from August 1, 2019. This has been levied to support the reconstruction of the state after the devastating floods in 2018.
Kerala Flood Cess will be in force for two years from the date of commencement. It will be imposed at 1% on the value of supply of goods or services or both. If a different cess percentage is applicable to your business, please do confirm this with your Chartered Accountant.
Here are the steps to help you handle Kerala Flood Cess in QuickBooks.
*Please note that the following steps will result in the GSTR 1 and GSTR 3B not picking up the CGST and SGST components of transactions which have cess applied. This will be resolved soon.
Action needed! Please refer to Step 15 of the section titled A: Creating a custom tax agency to track cess and follow the steps listed to enable GSTR1 and GSTR3B to pick up CGST and SGST from transactions involving Kerala Flood Cess.
A: Creating a custom tax agency to track cess
- In QuickBooks, click Taxes in the left navigation bar.
- Select Add tax and then choose Custom tax.
- In Tax name, enter Kerala Flood Cess. (Please note that this cannot be changed later).
- Enter a description for the tax.
- The Tax name is pulled into the Tax agency name. Example, Kerala Flood Cess Agency. Remove the word Agency. QuickBooks uses the agency name when printing a tax name on invoices. The cess when printed will read Kerala Flood Cess Agency if the word agency isn’t removed. (Please note that this cannot be changed later).
- Choose Start of current tax period as August. (If we choose April, we’ll need to perform four tax adjustments to get the tax centre to reflect data for August)
- Select Filing frequency and set it to Monthly.
- Choose the Reporting method as Accrual.
- Tick the option that reads This is Kerala Flood Cess.
- Tick the option that reads This tax is collected on sales.
- In Sales rate, enter 1.
- Leave This tax is collected on purchases (Kerala Flood Cess is applicable on sales to unregistered entities and so wil not affect input credit.)
- Click Save.
- In Chart of Accounts, you will see two new accounts named Kerala Flood Cess (this account is created with the tax name entered in Step 3).
- Kerala Flood Cess Payable, Type = Current liabilities, Detail type = Sales and service tax payable.
- Kerala Flood Cess Suspense, Type = Current liabilities, Detail type = Tax Suspense
- If you had previously created this cess, here's what you need to do.
- In QuickBooks, click Taxes in the left navigation bar.
- Click the drop down next to Tax and select Kerala Flood Cess.
- On the right, select Edit Kerala Flood Cess and then select Edit rates.
- Select Edit against the 1% rate that was previously created.
- In the Edit tax rate drawer, select This is Kerala Flood Cess and click Save.
B: Creating a group rate with GST and cess
- Go back to Taxes once again. This step is to create a tax group that combines a GST rate and the Kerala Flood Cess rate.
- Click Add tax.
- Select Group rate.
- Enter a Group name. Example. GST 28% + Kerala Flood Cess 1% (or the rate applicable to your business)
- Description is auto-populated with the same name as the Group name.
- In the first Tax rate dropdown, select Sales CGST 14%. In Applicable on, select Net amount.
- In the second Tax rate dropdown, select Sales SGST 14%. In Applicable on, select Net amount.
- Click Add tax rate to add another line.
- In the third Tax rate dropdown, select Kerala Flood Cess (Sales). This is the same name that was selected in the tax name field in Step 3 Section A. In Applicable on, select Net amount.
- Click Save. (Please note that this is a group rate and cannot be edited later). This can only be deactivated. Be sure that you have made the correct selections.
C: Record transactions using the group rate; view your cess liability
- Create an invoice and use the group rate created in Section B.
- Please note that Kerala Flood Cess is to be charged by registered businesses in Kerala on sales made to unregistered businesses/consumers with Place of Supply as Kerala. However, the rate will be available for selection on invoices made out to customers with any registration type and with any Place of Supply.
- Please note that the SGST and CGST calculated in the invoices and sales receipts created using the group rate will not reflect in the GSTR 1 and GSTR 3B reports. We expect this to be resolved with an update in the near future.
- Action needed! Please refer to Step 15 of the section titled A: Creating a custom tax agency to track cess and follow the steps listed to enable GSTR1 and GSTR3B to pick up CGST and SGST from transactions involving Kerala Flood Cess.
- You can review the tax liability in Taxes. Click the drop down next to Tax and select Kerala Flood Cess.
- Click View reports and select Taxable sales summary (name shows VAT Summary report, ignore this) and Taxable detail.
D: Filing and payment of Kerala Flood Cess
- To record monthly filing, click the Returns In the Open returns section, locate the period for which you want to file and select Prepare return.
- Select a Filing date as appropriate. The filing date of this cess coincides with the GSTR3B. (This must be on or after the last date of the filing period.)
- Click Mark as filed. (Please note that this cannot be undone!)
- After this is done, the return will appear in the Paid section in the Returns
- Against the relevant return, click Record payment.
- Select a bank account, Payment date, enter a Payment amount, Memo and click Save.
- To delete a tax payment, click the Payments history tab, and in the Action column, click the drop down next to the appropriate payment and select Delete.