GST Accounting Entries | Accounting Entries by Composition Dealer

GST Accounting Entries: Under the regime of GST, the taxpayer has to maintain the following accounts:

CGST A/C: The CGST A/C is further divided into two Output CGST and Input CGST.
SGST A/C: The SGST A/C is further divided into two Output SGST and Input SGST.
IGST A/C: The IGST A/C is further divided into two Output IGST and Input IGST.
e-Cash Ledger or Electronic Cash Ledger: The taxpayer maintains this ledger on the GST Portal to pay GST.

Accounting Entries by Composition Dealer

Persons registered under the composition scheme are not allowed to take an input tax credit of tax paid and not charge GST from the customer. They also cannot make interstate sales.

Hence, they are not needed to maintain accounts for input and output of GST. They have to make straightforward entries as follows:

On the sale of goods
Cash A/c Dr 5,000
To Sale A/c 5,000
On Purchase of goods
Purchase A/c Dr 4,000
To Cash A/c 4,000
On purchase of a Capital asset
Furniture A/c Dr 1,500
To Cash A/c 1,500
Payment of Composition Fees
Composition Fees A/c Dr 25
To Bank A/c 25

Influence on Profit and Loss Account and Balance Sheet

Composition fees are an expense and hence show as indirect expense in the profit and loss account. The balance sheet will be impacted. All the capital assets are shown at cost, including GST.

GAAP is applicable compulsorily on GST. So, all principles following revenue recognition etc. will be useful.

Accounting Entries for the Transactions made under Reverse Charge

At the time of purchasing such goods or services:

Purchase A/c Dr
Input CGST A/c Dr
Input SGST A/c Dr
To Output SGST RCM A/c
To Output CGST RCM A/c
To Creditor A/c

In the cases of purchase of assets or expenses, the particular account will be debited. The output SGST RCM A/c is used in place of the normal Output SGST A/c for differentiating both taxes since taxes under RCM cannot be adjusted against the input taxes and paid in cash.

At the Time of Payment of GST

Output SGST RCM A/c

Output CGST RCM A/c

To Cash/Bank A/c

Accounting Entries Made by Businesses apart from those Registered Under the Composition Scheme

The Accounts to be maintained by a regular dealer are

Input CGST A/c
Input SGST A/c
Input IGST A/c
Output CGST A/c
Output SGST A/c
Output IGST A/c
GST Payable

The person registered in Union Territory has to pay and maintain a UTGST account instead of an SGST account. So for the entries and examples which are stated below, such individuals must replace UTGST with SGST simply.

Intra State Sales (Sales within the same state or union territory)

Purchase made by X from Z, who is in the same condition for Rs. 8,000 and GST rate of 18% (CGST@9% & SGST@9%) Purchase A/c of Dr 8,000
Input SGST A/c Dr 720
Input CGST A/c Dr 720
To Z A/c 9440
Sales made by X to Y who is in the same state for Rs. 25,000
To Sales A/c 25,000
Y A/c Dr 29,500
To Output SGST A/c 2,250
To Output CGST A/c 2,250
He paid a consultation fee to CA of rs. 5,000
Consultation Fees A/c Dr 5,000
Input CGST A/c Dr 450
Input SGST A/c Dr 450
To CA A/c 5,900
Purchased furniture worth Rs. 3,000
Furniture A/c Dr 3,000
Input CGST A/c Dr 270
Input SGST A/c Dr 270
To Cash A/c 3,540
Total Inputs and Output taxes
The Input SGST = 720 + 450 + 270 = 1,440
The Input CGST = 720 + 450 + 270 = 1,440
Output CGST = 2,250
Output SGST = 2,250
On month end for GST Payable
Output CGST A/c Dr 2,250
Output SGST A/c Dr 2,250
To Input CGST A/c 1,440
To Input SGST A/c 1,440
To GST Payable A/c 1,620

Please note that some rules and regulations on input tax credit and the above entries will be made only for those purchases on which ITC is allowed. For e.g., GST paid on the purchase of a motor car is not permitted except for certain persons. For an individual to whom ITC is not permitted, accounting entry will be

Car A/c Dr 5,00,000

To Bank A/c 5,00,000

Inter-State Sales (Sales outside the state or union territory)

Purchase by X from Z, who is the indifferent state for Rs. 8,000 and rate of GST at 18% (CGST@9% & SGST@9%)
Purchase A/c Dr 8,000
Input IGST A/c Dr 1,440
To Z A/c 9,440
Sales made by X to Y, who is the indifferent state for Rs. 25,000
Y A/c Dr 29,500
To Output IGST A/c 4,500
To Sales A/c 25,000
Consultation Fees A/c Dr 5,000
He paid a consultation fee to CA of rs. 5,000
Input SGST A/c Dr 450
Input CGST A/c Dr 450
Sales made by X to B who is in the same state for Rs. 30,000
To CA A/c 5,900
Y A/c Dr 35,400
To Sales A/c 30,000
To Output CGST A/c 2,700
To Output SGST A/c 2,700
Total Inputs and Output taxes
Input CGST = 450
Input SGST = 450
Input IGST = 1,440
Output CGST = 2,700
Output SGST = 2,700
Output IGST = 4,500
On month end for GST Payable
Output CGST A/c Dr 2,700
Output SGST A/c Dr 2,700
Output IGST A/c Dr 4,500
To Input CGST A/c 450
To Input SGST A/c 450
To Input IGST A/c 1,440
To GST Payable A/c 7,560

Note that some rules and restrictions on input tax credit and the above entries will be made only for those purchases on which ITC is allowed.

Impact on the Profit and Loss Account and the Balance Sheet

All the tax accounts are not in the nature of direct/indirect expenses or income. Hence there will be no significant impact on the Profit and Loss account. However, if any GST is paid for, which input tax credit is not allowed, it should be booked as an expense and thus reduce the profit. (In case of payment is made for an expense)

The positive input tax credit or tax liability is shown as asset or liability in the balance sheet. The fixed assets on which input tax credit is permitted and taken are shown as costs excluding GST.