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Accounting Entries under GST

Under the GST regime the taxpayer needs to maintain the following accounts:

(i) CGST A/C

CGST A/C is further bifurcated into two Output CGST and Input CGST.

(ii) SGST A/C

SGST A/C is further bifurcated into two Output SGST and Input SGST.

(iii) IGST A/C

IGST A/C is further bifurcated into two Output IGST and Input IGST.

e-Cash Ledger or electronic cash ledger

This ledger is maintained by the taxpayer on the GST Portal to pay GST

Accounting entries under GST

Accounting entries under GST

We are taking a few basic business transactions to understand accounting entries under GST that shall be passed.

Instance 1:

  1. Mr. A bought goods worth 10,000 INR from the local market.
  2. He sold these goods for 30,000 INR in the same state
  3. He paid consultation fees 500 INR
  4. As Mr. A was thinking to extend the business he purchases furniture amounting 10,000 INR.

Assuming CGST @8% and SGST@8%

The accounting entries under GST will be:

S. NoParticularsDebitCredit
1Purchase A/c…Dr10,000
Input CGST…Dr800
Input SGST…Dr800
To Creditors A/c11,600
2.Debtors A/c…Dr17,400
To Sales A/c…Cr30,000
To output CGST A/c…Cr2,400
To Output SGST A/c…Cr2,400
3.Consultation fees A/c…Dr500
Input CGST…Dr40
Input SGST…Dr40
To Bank A/c…Cr580
4.Furniture A/c…Dr10,000
Input CGST…Dr800
Input SGST…Dr800
To XYZ furniture shop11,600

Total Input CGST= 800 + 40 + 800 = 1,640 INR
Total Input SGST= 800 + 40 + 800 = 1,640 INR
Total output CGST= 2,400 INR
Total output SGST= 2,400 INR
Therefore,

Net CGST payable = 2,400 – 1,640 = 760 INR

Net SGST payable = 2,400 – 1,640 = 760 INR

Instance 2:

  1. A bought goods worth 10,000 INR from outside state market.
  2. He sold these goods for 20,000 INR in the same state
  3. He sold the other goods manufactured for 10,000 INR in the different state
  4. He paid consultation fees 500 INR
  5. As Mr. A was thinking to extend the business he purchases furniture amounting 10,000 INR.

Assuming CGST @8%, SGST@8% ,and IGST @5%

The accounting entries under GST will be:

S. NoParticularsDebitCredit
1Purchase A/c…Dr10,000
Input IGST…Dr500
To Creditors A/c10,500
2.Debtors A/c…Dr17,400
To Sales A/c…Cr20,000
To output CGST A/c…Cr1,600
To Output SGST A/c…Cr1,600
3.Debtors A/c…Dr10,500
To Sales A/c10,000
To Output IGST A/c500
4.Consultation fees A/c…Dr500
Input CGST…Dr40
Input SGST…Dr40
To Bank A/c…Cr580
5.Furniture A/c…Dr10,000
Input CGST…Dr800
Input SGST…Dr800
To XYZ furniture shop11,600

For Intra-State Transaction
Total Input CGST = 40 + 800 = 840 INR
Total Input SGST= 40 + 800 = 840 INR
Total output CGST= 1,600 INR
Total output SGST= 1,600 INR
Therefore;

Net CGST payable = 1,600 – 840 = 760 INR

Net SGST payable = 1,600 – 840 = 760 INR

For Inter-State Transaction

Total IGST input = 500 INR
Total IGST output = 500 INR

Therefore;

Net IGST Payable = 500 – 500 = 0 INR

Impact of GST in financial statements

Let us understand the impact of GST in the financial statement

Profit and Loss Statement

ParticularsAmount (INR)ParticularsAmount (INR)
Raw materialXXXXSalesXXXX
PurchasesXXXX
DepreciationXXXX
Other expensesXXXX

Here you can see the decrease in the raw material cost and other expenses as under GST a taxpayer can sett-off input GST with that of Output GST.

Balance Sheet

AssetsAmount (INR)LiabilitiesAmount (INR)
CapitalXXXXFixed AssetsXXXX
Current LiabilitiesXXXXCurrent AssetsXXXX
Tax PayableXXXXBill ReceivableXXXX
Bills PayableXXXXCredit ReceivableXXXX

Under GST, the cost of fixed assets will also decrease as the taxpayer can take ITC (Input Tax Credit) on both the capital goods and services that are related to such capital goods like installation, assembling and so forth.

GST Compliance