GST Accounting Entries

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:

  1. On the sale of goods
  2. Cash A/c Dr 5,000
  3. To Sale A/c 5,000
  4. On Purchase of goods
  5. Purchase A/c Dr 4,000
  6. To Cash A/c 4,000
  7. On purchase of a Capital asset
  8. Furniture A/c Dr 1,500
  9. To Cash A/c 1,500
  10. Payment of Composition Fees
  11. Composition Fees A/c Dr 25
  12. 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.

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