Tag: Sample Entries for GST in Different Situations

Sample Entries for GST in Different Situations

Sample Entries for GST in Different Situations

As we all are aware about the fact that GST has already been introduced by the Central Government/State Government. The GST Law has been in force since 1st of July 2017, after the 18th GST council Meeting held on 30th June 2017. From the date of Implementation of GST law, GST council held 5 more meetings on different dates (Latest 23rd Meeting was held on 10th November 2017) in which the council has reviewed various Provisions of the GST law due to various reasons.

Major impact of such review has been noticed as

  1. Change in Rate of Tax on Different services or Goods,
  2. Extension of due dates for filing of returns required under the Law,
  3. Postponement of some provisions or returns till next upcoming financial year,
  4. Introduction of Supplementary Forms of return till the date all other forms would be available for filing etc. ,
  5. Procedural amendments also took place during the period

While there will be certain initial transition challenges, GST will bring in clarity in many areas of business. One of the areas is accounting and bookkeeping.

In this Article, we are going to discuss about the Change in accounting entries after Implementation of GST law to keep the books of accounts at par for Compliance with the Law.

Before GST scenario:

When GST was introduced there were many other taxes vanished by the Central Government/State Government, following the taxes which are not in force after GST like Excise, VAT, CST, Service Tax.

For those taxes we required to maintain separate books of accounts, ledger, register etc (apart from the Purchase, Sale, Inventory) .

  1. Excise Payable A/c (For Manufacturer)
  2. CENVAT credit A/c (For Manufacturer)
  3. Service tax Payable A/c
  4. Input Service Tax A/c (CENVAT Register)
  5. VAT Payable A/c
  6. VAT Input A/c
  7. CST A/c’s (For Inter-State Sale Purchase Transactions)

For example, A Person (Trader) Mr. A was required to maintain following Basic accounts :

  1. VAT Payable A/c
  2. VAT Input A/c
  3. CST A/c’s (For Inter-State Sale Purchase Transactions)
  4. Service Tax A/c (However, He was not able to claim any Service tax input credit as he is a Trader with Output VAT. Service tax was not allowed to set off against the VAT/CST)

Now, after the implementation of GST,

GST is One Tax, which includes impact of all previous taxes such as Excise, VAT, and Service Tax.

Now, the same trader Mr. A is required to maintain the following a/cs apart from Purchase, Sale, Inventory etc

  • 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 (to be maintained on Government GST portal to pay GST)

While, the number of accounts is more, apparently, once you go through the accounting you will find it is much easier for record keeping. One of the biggest advantages Mr. A will have is that he can set off his input tax on service with his output tax on sale also.

Accounting entries under GST

Illustration 1: Intra-state Transaction

  1. A purchased goods for Rs. 1,00,000 locally (intrastate)
  2. He sold them for Rs. 1,50,000 in the same state
  3. He paid legal consultation fees Rs. 5,000
  4. He purchased Printer for his office for Rs. 12,000

Assuming CGST @9% and SGST@9%

The entries will be-

1 Purchase A/c ………………Dr. 1,00,000
Input CGST A/c ……………Dr.     9,000
Input SGST A/c ………    …Dr.     9,000
              To Creditors A/c 1,18,000
2 Debtors A/c ………………Dr. 1,77,000
             To Sales A/c 1,50,000
             To Output CGST A/c 13,500
             To Output SGST A/c 13,500
3 Legal fees A/c ………..……Dr. 5,000
Input CGST A/c ……………Dr. 450
Input SGST A/c ……………Dr. 450
             To Bank A/c 5,900
4 Printer A/c ………..……Dr. 12,000
Input CGST A/c ……………Dr. 1080
Input SGST A/c ……………Dr. 1080
             To Royal Printer Shop A/c 14,160

 

Total Input CGST=9,000+450+1080= Rs. 10,530
Total Input SGST=9,000+450+1080= Rs. 10,530
Total output CGST=13,500
Total output SGST=13,500
Therefore Net CGST payable=13,500-10,530=2970
Net SGST payable=13,500-10,530=2970

5 Output CGST A/c ……………Dr. 13,500
Output SGST A/c ……………Dr. 13,500
          To Input CGST A/c 10,530
            To Input SGST A/c 10,530
             To Electronic Cash Ledger A/c 5,940

 

Thus, after adjustment of input tax credit, tax liability of Rs. 27,000 is reduced to only Rs.5,940.  It can be noticed from the above that GST paid on legal fees is also adjusted which was not possible before GST scenario.

If, any input tax credit remains, the same can be carried forward to the next year.

 

Illustration 2: Inter-state Transaction

  1. A purchased goods Rs. 1,50,000 from outside the State
  2. He sold Rs. 1,50,000 locally
  3. He sold Rs.1,00,000 outside the state
  4. He paid telephone bill Rs. 5,000
  5. He purchased a Desktop for his office for Rs. 12,000 (locally)

Assuming CGST @9% and SGST@9%

1 Purchase A/c ………………Dr. 1,50,000
Input IGST A/c ……………Dr. 27,000
           To Creditors A/c 1,77,000
2 Debtors A/c ………………Dr. 1,77,000
             To Sales A/c 1,50,000
             To Output CGST A/c 13,500
             To Output SGST A/c 13,500
3 Debtors A/c ………………Dr. 1,18,000
             To Sales A/c 1,00,000
             To Output IGST A/c 18,000
4 Telephone Expenses A/c ..…Dr. 5,000
Input CGST A/c ………………..Dr. 450
Input SGST A/c …..……………Dr. 450
             To Bank A/c 5,900
5 Computer A/c.…..Dr. 12,000
Input CGST A/c ……………Dr. 1080
Input SGST A/c ……………Dr. 1080
             To Royal Computer Shop A/c 14160

 

Total CGST input =450+1,080=1,530
Total CGST output =13,500
Total SGST input =450+1,080=1,530
Total SGST output =13,500
Total IGST input =27,000
Total IGST output =18,000

Particulars CGST SGST IGST
Output liability 13,500 13,500 18,000
Less: Input tax credit
   CGST 1,530
   SGST 1,530
   IGST 9,000 18,000
Amount payable 2,970 11,970 NIL

 

IGST input will first be applied to set off IGST and then CGST. Balance if any will be applied to set off SGST.

So out of total input IGST of Rs. 27,000, firstly it has completely set off against IGST. Then balance Rs.9,000 against CGST.
From the total Rs.45,000, only Rs. 14,040 is payable.
So the setoff entries will be-

Set off against CGST output
1 Output CGST ………………Dr. 10,530
           To Input CGST A/c 1,530
           To Input IGST A/c 9,000
2 Set off against SGST output
Output SGST ………………Dr. 1,530
           To Input SGST A/c 1,530
3 Set off against IGST output
Output IGST ………………Dr. 18,000
           To Input IGST A/c 18,000
4 Final payment
Output CGST A/c ……………Dr. 2,970
Output SGST A/c ……………Dr. 11,970
             To Electronic Cash Ledger A/c 14,940

 

Accounting Policy and Principle:

GAAP is applicable on GST. Principle of Revenue Recognition etc. will automatically be applicable. It is mandatory to comply with the GAAP.

*GAAP – Generally Accepted Accounting Principles

Period to retain the Books for Accounts:

Every registered person must keep and maintain books of account at least for five years from the due date of filing of Annual Return for the relevant year.

Due to Transition to GST it is needed to address aspects of financial reporting systems for proper reporting & compliance under the law.

It has been noticed by us that many of the business facing accounting or compliance issues due to various reason one of them being accounting issues, which has been addressed in this Article.For other identified issues, we are here to assist you in the interest of both Assessee and the Government of India and Indian states.

If you seek any further clarity , feel free to write to us on, info@gapeseedconsulting.com or you can also call us at +91-9599444639.