GST

Accounting Entries Under GST

As GST has subsumed all the indirect taxes which is now “One Nation, One Tax Regime. However, there will be challenges which will be faced initially as Good & Service Tax implementation will bring much clarity in the areas of business. In this blog, we are going to discuss Accounting Entries Under GST.

Situation under Previous laws

Under previous scenario below mentioned accounts related to indirect accounts were to be prepared by a business enterprise:

• Excise Payable Account – For Manufacturer
• Cenvat Credit Account – For Manufacturer
• Output Vat Account
• Input Vat Account
• Service Tax – Input and Output

How to pass accounting entries under GST?

Under GST all the indirect taxes (Service tax, Vat and Excise) will be merged and maintained under one account which will benefit for availing input credit at all levels.

Following are the accounting ledgers which are required to be maintained by the assessee under GST:

• 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 (accessible at GST Portal^[1] to pay GST)

Accounting Entries under GST with Examples

• For Intrastate Transaction:
• Purchased Goods from A within the state for Rs.10000/-GST Rate 18% (9% SGST & 9% CGST)

Accounting Entry

Purchase a/c	10000	–
To Input CGST To Input SGST	900 900	–
To A	–	11800

• Sale of Goods within the state for Rs. 25000 to X

X a/c                              Dr	29500	–
To Sales	–	25000
To Output CGST To Output SGST	– –	2250 2250

Accounting Entry

• Professional Fees Paid of Rs.5000 to CA B.

Accounting Entry

Professional Fees     Dr	5000	–
Input CGST Input SGST	450 450	–
To CA B	–	5900

Total Input and Output Taxes

Particulars	Amount (Rs.)
Input CGST	1350
Input SGST	1350
Total Input Tax	2700
Output CGST	2250
Output SGST	2250
Total Output Tax	4500
GST Payable	1800

• For Interstate Transaction
• Purchased Goods worth Rs. 8000 from Z from a different state
• GST Rate 18%

Accounting Entry

Purchases a/c        Dr	8000	–
IGST                      Dr	1440	–
To Z	–	9440

• Goods sold to an interstate for Rs. 25000 (GST Rate 18%)

A                  Dr	29500	–
To Sales	–	25000
To IGST	–	4500

• Professional fees paid to CA K of Rs. 5000

Professional Fees    Dr	5000	–
Input CGST            Dr Input SGST             Dr	450 450	– –
To CA K	–	5900

• Goods sold to M within the same state for Rs. 30000

M                        Dr	35400	–
To Sales	–	30000
To Output CGST To Output SGST	– –	2700 2700

Total Input and Output Taxes

Particulars	Amount (in Rs.)
Output CGST Output SGST	2700 2700
Total Output Taxes	5400
Output IGST	4500
Input CGST Input SGST	450 450
Total Input Taxes	900
Input IGST	1440
GST Payable	7560

Please note that there are some rules and regulations for claiming input tax credit

Impact on Profit and Loss Account and Balance Sheet

• As all the tax expenses are not classified as direct or indirect expense/income. Therefore it will not impact the profit and loss account.
• However, if input tax credit on certain goods is not available in such a case the GST paid has to be booked as expenses which will ultimately reduce the profit.
• The tax liability or input tax credit will be shown as liability or asset in the Balance Sheet

Accounting Entries under GST by Composition Dealer

 A person registered under Composition Scheme is not allowed to take input tax credit and also are not allowed to charge Goods & Service Tax from the customer.

Thus they are not required to maintain accounts for input and output GST.

Accounting entries for Composition Dealers

1)    Sale of Goods	Cash a/c               Dr 5000        – To Sales                      –            5000
2)    Purchase of Goods	Purchase a/c        Dr 4000
	To Cash                      –            4000
3)    Payment of GST	Composition fees Dr 25           –
	To Bank                       –           25

Impact on Profit and Loss Account and Balance Sheet

• Composition Fees is an expense and will be debited to the profit and loss account.
• There will be no impact on the Balance Sheet.
• All the capital assets will be shown under assets will be including Good & Service Tax.

Conclusion

With the introduction of new GST regime, different taxes have been subsumed therefore the number of accounts to be created has reduced significantly. In case you seek to know more on GST related laws, contact Enterslice.

Read our article: GST on work contracts and implication in the Oil & Gas Sector