How to Record GST Transactions in Accounts – Journal Entries

Accounting Treatment Under GST

The Goods and Services Tax (GST) has simplified the indirect system in India with the “one nation, one tax” approach. It has also simplified the business and accounting processes which ensure more transparency in business reporting and compliance.

In the GST regime, a taxpayer is required to maintain all types of accounts and records related to GST transactions such as Input Supplies (Purchase), Output Supplies (Sale), Production, Input Credit, Output Tax, Stock, Import-Export, Reverse charge, etc.

In this article, we will discuss the different types of business transactions related to GST and the journal entries of these transactions in the books of accounts or Accounting Software.

Pre-GST Scenario – Accounting Under VAT, CST, Service Tax, Excise

In the past tax scenario, there were different types of taxes for different business transactions and cross-utilization of input credit was not allowed. Therefore a taxpayer had to maintain separate ledger accounts for every tax law:

Ledger Accounts Under Current Tax RegimeTaxpayer
Excise Payable A/cManufacturer
Cenvat Credit A/cManufacturer
VAT Payable A/cTrader/Manufacturer
VAT Input Credit A/cTrader/Manufacturer
CST A/cTrader/Manufacturer (For Inter State Sale-Purchase)
Service Tax Payable A/cService Provider
Service Tax Credit A/cService Provider/Manufacturer (Credit not allowed to trader)

GST Regime – Types of Ledger Accounts to be Maintained Under GST

Under the GST regime, all indirect taxes will be subsumed in GST and there will be dual GST Structure based on intra-state supplies and inter-state supplies. The CGST and SGST will be charged on intra-state supplies whereas the IGST (Integrated Goods and Services Tax) will be charged on all inter-state supplies. Therefore separate ledger account is required to be maintained related to CGST, SGST and IGST.

List Ledger Accounts To Be Maintained Under GST Regime
CGST Payable A/c (Tax on Intra-State Outward Supplies)
CGST Input Credit A/c (Input Tax on Intra-State Inward Supplies)
SGST Payable A/c (Tax on Intra-State Outward Supplies)
SGST Input Credit A/c (Input Tax on Intra-State Inward Supplies)
IGST Payable A/c (Tax on Inter-State Outward Supplies
IGST Input Credit A/c (Tax on Inter-State Inward Supplies)
Electronic Cash Ledger (to be maintained on GST Portal (gst.gov.in)

Journal Entries Under GST 

 

1. Purchase Transactions (Input Supplies of Goods or Services)

A.Intra-State Purchase

Purchase A/c _____________ Dr.

CGST Input Credit A/c ____Dr.

SGST Input Credit A/c _______Dr.

To  Creditors A/c

B. Inter-State Purchase

Purchase A/c _____________ Dr.

IGST Input Credit A/c _______Dr.

To  Creditors A/c

2. Sale Transactions (Outward Supplies of Goods and Services)

A. Intra-State Supplies

Debtors A/c _____________Dr.

To Sales A/c

To CGST Payable A/c

To SGST Payable A/c

B. Inter-State Supplies

Debtors A/c _____________Dr.

To Sales A/c

To IGST Payable A/c

3. Set Off of Input Credit Against Out Tax Liability of GST

Under the GST law, the set-off of input credit is allowed in the following order:-

GST Set Off Chart

Input CreditOrder of Set Off of Input Credit Against Output Liability
CGSTFirst Towards CGST
Balance Towards IGST
SGSTFirst Towards SGST
Balance Towards IGST
IGSTFirst Towards IGST
Secondly Towards CGST
Balance Towards SGST

We can understand the order of input credit set off and its journal entries with an example:

Example – Month End Details (Total Balances):

CGST Payable (Output) A/c   – Rs. 50,000

CGST Input Credit A/c   – 30000

SGST Payable (Output) A/c  – Rs. 50,000

SGST Input Credit A/c -30000

IGST Payable (Output) A/c    – Rs. 80000

IGST Input Credit A/c – 100000

Set Off At the end of the Month:

Input CreditCGST Payable - Rs. 50000SGST Payable - Rs. 50000IGST Payable - Rs. 80000
CGST Input CreditRs. 30000--
SGST Input Credit-Rs. 30000-
IGST Input CreditRs. 20000-Rs. 80000
Electronic Cash Ledger-Rs. 20000-
TotalRs.
50000
Rs.
50000
Rs.
80000

Accounting Entries for GST Set off and Cash/Bank Payment

1. CGST Payable A/c__________ Dr.              50000

To CGST Input Credit A/c                                                  30000

To IGST Input Credit A/c                                                   20000

2. SGST Payable A/c__________ Dr.              50000

To SGST Input Credit A/c                                                  30000

To Electronic Cash Ledger A/c                                          20000

3. IGST Payable A/c__________ Dr.              80000

To IGST Input Credit A/c                                                   80000

Note: Electronic Cash Ledger is the online account (kind of e-wallet) maintained on Government GST portal to pay GST in cash/bank.

4. Reverse Charge Transactions in GST

Normally liability to pay GST is on supplier but the Government has notified certain supplies covered under Reverse Charge Mechanism on which liability to pay GST (partly or fully) is on the receiver of supply. In such case the accounting treatment will be as follows:

A. In the Books of Supplier

Debtor A/c   ____________________Dr.

To Sales A/c

To CGST Payable A/c (% of CGST Payable by Supplier, if any)

To SGST Payable A/c (% of SGST Payable by Supplier, if any)

B. In the Books of Receiver 

Purchase A/c_____________________Dr.

CGST Input Credit A/c_______________Dr. (Total CGST on Input)

SGST Input Credit A/c_______________Dr.  (Total SGST on Input)

To Creditors A/c

To CGST Payable A/c (% of CGST Payable by Receiver Under RCM)

To SGST Payable A/c (% of SGST Payable by Receiver Under RCM)

Note: The above entries of reverse charge transaction is shown by assuming intra-State Supply. If there is inter-state supply then CGST and SGST a/c should be replaced with IGST a/c.

5. Refunds in Case of Export of Goods and Services:

Under GST law, the exports of goods or services are treated as Inter-State Supplies. In the case of export supplies, the exporter has two options:

A. Export Under Bond/LUT (Clear goods without payment of duty and claim the refund of Input credits): In this case, the exporter has to record sale without charging any tax and determine the unutilized input credit of inputs for claiming the refund. The journal entry for refund claim will be as follows:

CGST Refund Receivable A/c  _____________ Dr.

SGST Refund Receivable A/c  _____________ Dr.

IGST Refund Receivable A/c  _____________ Dr.

To CGST Input Credit A/c (unutilized input credit)

To SGST Input Credit A/c (unutilized input credit)

To IGST Input Credit A/c (unutilized input credit)

B. Export Under Rebate Claim (Clear goods with payment duty and claim the refund of duty paid on export goods): In this case, the sale will be recorded as follows:

Debtors A/c _____________Dr.

IGST Refund Receivable A/c______Dr.

To Sales A/c

To IGST Payable A/c

6. Imports

Imports are treated as Inter-State supplies and therefore, IGST will be payable by the importer of goods or services. Further, the Customs duty is also applicable in the case of Import of Goods but the input credit of Custom duty is not allowed. Hence the importer can claim input credit of IGST and the Customs Duty will be added in the cost of imported goods:-

Purchase A/c_________________Dr.

IGST Input Credit A/c ______________Dr.

To Creditor A/c

To IGST Payable A/c

To Custom Duty Payable A/c

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Arun
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Arun

Very Useful. Thank you.

Amy
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Amy

Helpful Indeed… thank you.. 🙂

chunilal G Patel
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chunilal G Patel

now i am purchase plant & machinery worth rs.35400/- ( basic value rs.30000/- + CGST Rs.2700 +SGST Rs.2700/- ) in tally ERP9 Latest Verson how it is entered and tax credit taken. Plant & Machinery already a/c in Tally under Fixed Assets.it is shown in Purchase Account or through Journal Voucher entry. please clarify immediate and reply with entry

Shekar
Guest

F9 purchase
Plant&machinery a/c Dr ..34000
CGST INPUTa/c….2700
SGST INPUT.a/c….2700
To cash/party

Shekar
Guest

U r ITC is -5400

shiv
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shiv

what is ledger made in tally for bank charges charged gst

Shekar
Guest

Bank charges under Indirect expenses

kumar
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kumar

thanks for professional guideness

pravin khandare
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pravin khandare

what is the gst treatement if I purchase the materials from inter sate and sale it intra state . I know I need to pay igst for inter sate purchase and collect the cgst and sgst from intra state . my question is after sale how many tax I need to pay the government . I alrady pay igst while purchase the material from inter state.

D Radhika
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D Radhika

How we enter the Telephone bill entry when bill received and the payment entry with GST Heads.

ashok tiwari
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ashok tiwari

how to make entry purchase in gst from registered dealer we can not claim itc pls ans this

venkatesh
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venkatesh

Dear Sir,
can I Know how to Pass RCM Intries
Example for The Month We need to Pay RCM Payable Rs 1000000.
For bank entry we pass As
RCM Payable 10,00,000/- Dr
To Bank 10 00 000/- cr
Where as how to Declare in Books RCM Invoice which is Raise by us Equal Amount
Kindly clarify.

bikram agarwal
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bikram agarwal

i got transtional credit on stock Rs 10,000 in cgst ledger..as i was not excise dealer so i did nt have ane any excise ledger..what will be the journal entry of this??

kamlesh
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kamlesh

I want to account pre paid freight charges in my books
on prepaid freight charges clearing agent is charging CGST & SGST.
but the amount is nil. only i want to account TAX part how to account.

Bindhu
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Bindhu

how to apply GST in Construction company?

GAUTAM
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GAUTAM

HOW TO MAKE ENTRY FOR COMPOSITION PURCHASE ENTRY IN THE BOOKS OF ACCOUNTS

VENKATESH REDDY
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VENKATESH REDDY

THANK YOU

Archana
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Archana

Thanks for providing valuable information..

KRISHNA
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KRISHNA

Thank you for the best information, this is very clear and it is correct method.

nilam
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nilam

services gst adjustment entry and government Paid entry Help

Umang Mangi
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Umang Mangi

Does a purchase from a local Feriwala of scrap will be liable under reverse charge mechanism

M Kumar
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M Kumar

what will be the accounting entry for payment of GST in cash and claiming input credit