• Kandivali West Mumbai 400067, India
  • 022 39167251
  • support@email.com
April 10, 2020

Know How to pass Accounting Entries under Goods and Service tax

by facelesscompliance in Compliance Law, GST

Know How to pass accounting entries under Goods and Service tax

Accounting under GST is simpler compared to the former VAT and excise. However, one must understand and pass accounting entries in the books of accounts regularly so that ITC is claimed properly. In this article we would learn about the different accounting entries that need to be passed under Goods and Service tax

Under the GST regime the accountant has to maintain the following accounts apart from purchase, sales a/c:

  1. Input CGST a/c
  2. Output CGST a/c
  3. Input SGST a/c
  4. Output SGST a/c
  5. Input IGST a/c
  6. Output IGST a/c
  7. Electronic cash ledger a/c

While the number of accounts is more apparently, but much easier once record keeping is maintained. The below is the accounting entries under GST explained with below example:

Example 1:

Mr. X has purchased goods of Rs. 2, 50, 000(excluding GST) locally at credit. He sold the same to local customers at Rs. 5,00,000 (excluding GST) on credit. He availed consultation service of Rs. 50,000(excluding GST) also he furnished furniture for his business of Rs. 1,70,000(excluding GST).

We assume that GST is charged as follow:

CGST 9%

SGST 9%

IGST 9%

The entries for the above transactions are as below:

  1. Purchase of goods of Rs. 2,50,000 within the state:

Purchase A/c——–Dr.                   2,50,000

Input CGST a/c——Dr.                   22,500

Input SGST a/c——Dr.                   22,500

               To Creditors A/c               2,95,000

  • Sale of goods of Rs. 5,00,000 within the state on credit:

Debtors a/c———Dr.                    5,90,000

               To Sales a/c                                      5,00,000

               To Output CGST a/c                        45,000

               To Output SGST a/c                         45,000

  • Availed consultation service of Rs. 50,000

Consultation service a/c——-Dr.   50,000

Input CGST a/c——————-Dr.   4,500

Input SCGST a/c—————–Dr.    4,500

               To Bank a/c                                      59,000

  • Purchase of furniture for business purpose of Rs. 1,70,000

Furniture a/c—————Dr.         1,70,000

Input CGST a/c————Dr.          15,300

Input SCGST a/c———–Dr.         15,300

               To Bank a/c                                      2,00,600

  • Final enter for payment of GST liability through Electronic cash ledger:

Total input CGST= 22,500+ 4,500+ 15,300= 42,300

Total input SGST= 22,500+ 4,500+ 15,300= 42,300

Total Output CGST= 45,000

Total Output SGST= 45,000

The accounting entry for final liability shall be as under:

Output CGST a/c——-Dr.              45,000

Output SGST a/c——-Dr.              45,000

               To Input CGST a/c                           42,300

               To Input SGST a/c                            42,300

               To Electronic cash Ledger a/c      5,400

Thus, due to input tax credit, original tax liability of Rs. 90,000 finally reduced to Rs. 5,400. The GST paid on consultation fees can be used for set off against the GST payable on goods sold, which was not possible under the old regime of VAT and Service tax. In case any ITC is been left after the setoff then it had been carried forward to the next year.

Example 2:

Mr. X registered person in Maharashtra purchased goods from Goa of Rs. 2,50,000(excluding GST) at credit. He sold the same to local customers at Rs. 3,00,000 (excluding GST) on credit and sold balance in Gujarat at Rs. 3,00,000. He paid Internet and Telephone bill of his office of Rs. 8,000(excluding GST).

We assume that GST is charged as follow:

CGST 9%

SGST 9%

IGST 9%

The entries for the above transactions are as below:

  1. Purchase of goods of Rs. 2,50,000 from Goa:

Purchase A/c——–Dr.                   2,50,000

Input IGST a/c——Dr.                    45,000

               To Creditors A/c               2,95,000

  • Sale of goods of Rs. 3,00,000 within the state on credit:

Debtors a/c———Dr.                    3,54,000

               To Sales a/c                                      3,00,000

               To Output CGST a/c                        27,000

               To Output SGST a/c                         27,000

  • Sale of goods of Rs. 3,00,000 in the state of Gujarat:

Debtors a/c———Dr.                    3,54,000

               To Sales a/c                                      3,00,000

               To Output IGST a/c                         54,000

  • Paid Internet and Telephone bill of Rs. 8,000 excluding GST

Consultation service a/c——-Dr.   8,000

Input CGST a/c——————-Dr.   720

Input SCGST a/c—————–Dr.    720

               To Bank a/c                                      9,440

  • Final enter for payment of GST liability through Electronic cash ledger:

Total input CGST= 720

Total input SGST= 720

Total input IGST= 45,000

Total Output CGST= 27,000

Total Output SGST= 27,000

Total Output IGST= 54,000

Calculation of final output liability as per GST setoff rules:

ParticularsCGSTSGSTIGST
Output Liability27,00027,00054,000
Less: Input tax credit   
IGST  45,000
CGST720  
SGST 720 
Final tax payable26,28026,2809,000

The accounting entry for final liability shall be as under:

Output CGST a/c——-Dr.              27,000

Output SGST a/c——-Dr.              27,000

Output IGST a/c——–Dr.              54,000

               To Input CGST a/c                           720

               To Input SGST a/c                            720

               To Input IGST a/c                             45,000

               To Electronic cash Ledger a/c      61,560

GAAP is applicable mandatorily on GST. So, all principles following revenue recognition etc. will be applicable. Every registered taxable person must keep and maintain books of account. From tax compliance point of view the records to be kept for 8 years