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:
- Input CGST a/c
- Output CGST a/c
- Input SGST a/c
- Output SGST a/c
- Input IGST a/c
- Output IGST a/c
- 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:
- 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:
- 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:
| Particulars | CGST | SGST | IGST |
| Output Liability | 27,000 | 27,000 | 54,000 |
| Less: Input tax credit | |||
| IGST | 45,000 | ||
| CGST | 720 | ||
| SGST | 720 | ||
| Final tax payable | 26,280 | 26,280 | 9,000 |
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
