GST

Accounting Entries Under 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/c10000
To Input CGST To Input SGST900 900
To A11800
  • Sale of Goods within the state for Rs. 25000 to X
X a/c                              Dr29500
To Sales25000
To Output CGST To Output SGST– –2250 2250

Accounting Entry

  • Professional Fees Paid of Rs.5000 to CA B.
READ  Types of GST Returns and Their Due Dates

Accounting Entry

Professional Fees     Dr5000
Input CGST Input SGST450 450
To CA B5900

Total Input and Output Taxes

ParticularsAmount (Rs.)
Input CGST1350
Input SGST1350
Total Input Tax2700
Output CGST2250
Output SGST2250
Total Output Tax4500
GST Payable1800
  • For Interstate Transaction
  • Purchased Goods worth Rs. 8000 from Z from a different state
  • GST Rate 18%

Accounting Entry

Purchases a/c        Dr8000
IGST                      Dr1440
To Z9440
  • Goods sold to an interstate for Rs. 25000 (GST Rate 18%)
A                  Dr29500
To Sales25000
To IGST4500
  • Professional fees paid to CA K of Rs. 5000
Professional Fees    Dr5000
 Input CGST            Dr Input SGST             Dr450 450– –
To CA K5900
  • Goods sold to M within the same state for Rs. 30000
M                        Dr35400
To Sales30000
To Output CGST To Output SGST– –2700 2700

Total Input and Output Taxes

ParticularsAmount (in Rs.)
Output CGST Output SGST2700 2700
Total Output Taxes5400
Output IGST4500
Input CGST Input SGST450 450
Total Input Taxes900
Input IGST1440
GST Payable7560

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
READ  25th GST Council Meeting - Highlight of the Key Decisions

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 GoodsCash a/c               Dr 5000        – To Sales                      –            5000
2)    Purchase of GoodsPurchase a/c        Dr 4000
 To Cash                      –            4000
3)    Payment of GSTComposition 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

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