Accounting Entries: GST was introduced on a dual structure basis. It means on a transaction both central and state governments will levy taxes. This article will clear your problems regarding passing of Accounting entries in GST Regime for Tax payer registered Normal Scheme.
In the case of INTRA state supplies, these taxes are levied-
- Central Goods and Services Tax (CGST) and
- State Goods and Services Tax (SGST), or
- Union Territory Goods and Services Tax (UTGST)
In the case of INTER state supplies, only Integrated Goods and Services Tax (IGST) is charged.
Read Also: GST Return : 10 Upcoming changes in GST Return by GSTN
Manner of ITC Utilization
Input Tax Credit (ITC) of CGST and SGST/UTGST is available straight forward but cross-utilization is not allowed. Example- CGST Credit can not be utilized for Output liability of SGST/UTGST and vice versa.
But Input Credit of CGST or SGST/UTGST utilization with IGST is allowed. Example- CGST credit is allowed for the utilization of payment of IGST Output and vice versa. Read More: GST Input Tax Credit (ITC) Set-off Rules – Simplified with examples
Explanation of Transaction
Every Registered person pays GST on INPUT/ INWARD leg and collects GST on OUTPUT/ OUTWARD leg. These input and output taxes are utilized as mentioned above.
Read Also : Input Tax Credit under GST- A Detailed Guide On Facts You Didn’t Know
Accounts for GST Accounting entries
Once the Taxpayer is registered on GST portal, few Electronic Ledgers are available automatically-
1. Electronic cash ledger : It reflects deposits made in cash or bank transfer made by a taxpayer. It is used to set off a penalty, fees, interest, tax, or any other payable amount.
2. Electronic credit ledger : It reflects the details of Input Tax Credit as self-assessed by the entity in the returns. The amount specified is only used to set off tax liability cannot be used to set off Interest, penalty, fees.
3. Electronic tax liability register : It reflects self-assessed Total Tax Liability of a taxpayer as per the returns filed.
Read Also: Maintenance of books of Account and Records under GST law
Generally, while doing Accounting we make these accounts in our books-
- INPUT CGST A/c
- INPUT SGST/ UTGST A/c
- INPUT IGST A/c
- OUTPUT CGST A/c
- OUTPUT SGST/UTGST A/c
- OUTPUT IGST A/c
- CGST UTILIZATION A/c
- SGST/ UTGST UTILIZATION A/c
- IGST UTILIZATION A/c
- BLOCKED ITC A/c
Explanation
1. INPUT Accounts (CGST/ SGST/ IGST/ UTGST)
- These accounts represents amounts paid on purchases or services received or Inward leg by the business entity.
- Nature of account- Current Asset
2. OUTPUT Accounts (CGST/ SGST/ UTGST/ IGST)
- These accounts represents Amounts charged on the outward leg or sales or services provided by the business entity.
- Nature of account- Current liability
3. Utilization Accounts
- All eligible tax credit is transferred to the account which is set off against OUTPUT liability as per the utilization rules set by the GST Law. Read More at GST Input Tax Credit (ITC) Set-off Rules – Simplified with examples
- Nature of account- Nominal Account
4. Blocked ITC
- GST paid on some transaction is not available, such INPUT tax is known as Blocked ITC. GST in INPUT accounts is transferred to Blocked ITC A/c if required. Blocked ITC is transferred to Profit and Loss Account.
- Nature of account- Expenses
Read Also: 14 Blocked Input Tax Credit (ITC) under GST
GST Accounting entries Explained with examples
1. Intra- state purchase of goods costing Rs 11,800 (including GST) @18% – Forward Charge Mechanism
| Purchase A/c Dr | 10000 | |
| Input CGST A/c Dr | 900 | |
| Input SGST/ UTGST A/c Dr | 900 | |
| To Creditor/ Bank/ Cash A/c | 11800 |
2. Inter- state purchase of goods costing Rs 11,800 (including GST) @18% – Forward Charge Mechanism
| Purchase A/c Dr | 10000 | |
| Input IGST A/c Dr | 1800 | |
| To Creditor/ Bank/ Cash A/c | 11800 |
Note : Same entry for any kind of service on the inward leg.
3. Intra- state or Inter-state purchase of goods costing Rs 11,800 (including GST) @18%- Reverse Charge Mechanism
| Purchase A/c Dr | 10000 | |
| To Creditor/ Bank/ Cash A/c | 10000 | |
| Tax is directly paid to the government. | ||
| Input GST a/c (CGST/ SGST/ UTGST/ IGST) Dr | 1800 | |
| To Bank/ Cash / RCM payable A/c | 1800 |
GST payable on the RCM basis is paid by the entity in cash as it can’t adjust with input tax.
4. Intra- state Sales of goods costing 11,800 (including GST) @18%- Forward Charge Mechanism
| Debtor/ Bank/ Cash A/ c Dr | 11800 | |
| To Sales A/c | 10000 | |
| To Output CGST A/c | 900 | |
| To Output SGST/ UTGST A/c | 900 |
5. Inter- state Sales of goods costing 11,800 (including GST) @18%- Forward Charge Mechanism
| Debtor/ Bank/ Cash A/c Dr | 11800 | |
| To Sales A/c | 10000 | |
| To Output IGST A/c | 1800 |
GST Interest Calculator
5. Intra- state or Inter-state Sale of goods costing 11,800 (including GST) @18%- Reverse Charge Mechanism
| Debtor/ Bank/ Cash A/c Dr | 10000 | |
| To Sales A/c | 10000 |
Note: Tax is deposited by the Debtor directly.
6. On some transactions, the Input tax credit is blocked and such amount is transferred to Profit and Loss Account.
Example: GST paid Rs.1000, on inter-state purchase made is blocked and GST paid Rs.1500, on intra-state service has taken is blocked.
| Blocked ITC A/ c Dr | 2500 | |
| To Input IGST A/c | 1000 | |
| To Input CGST A/c | 750 | |
| To Input SGST/UTGST A/c | 750 |
Utilization of GST A/c (CGST/ SGST/ UTGST/ IGST) is used to settle output liability with input tax credit as per prescribed rules. The calculation is done in returns and single entry is passed generally, at the end of the month. Balances of INPUT Accounts are transferred here wholly. As per calculations balances of OUTPUT are transferred to extent of UTILIZATION.
Debit Closing balance of utilization A/c is transferred to INPUT GST A/c (CGST/ SGST/ UTGST/ IGST). The balance remaining in OUTPUT accounts will be transferred to the GST payable account (CGST /SGST/ UTGST/ IGST).
GST Input Tax Credit Calculator
For Example: Mr. Shiv paid GST on the purchase after adjusting carry forwards
| IGST | CGST | SGST |
| 40000 | 30000 | 50000 |
And he collects GST on the sales
| IGST | CGST | SGST |
| 50000 | 70000 | 70000 |
| PARTICULAR | IGST | CGST | SGST |
| INPUT TAX | 40000 | 30000 | 50000 |
| (Less) Utilized | 40000 | 30000 | 50000 |
| CARRY FORWARD | 0 | 0 | 0 |
| PAYABLE OUTPUT | 10000 | 40000 | 20000 |
The following accounting entries will be passed.
| Particular | Debit | Credit |
|---|---|---|
| CGST Utilization A/c | 30000 | |
| To CGST Input A/c | 30000 | |
| SGST Utilization A/c | 50000 | |
| To SGST Input A/c | 50000 | |
| IGST Utilization A/c | 40000 | |
| To IGST Input A/c | 40000 | |
| CGST Output A/c | 70000 | |
| To CGST Utilization A/c | 30000 | |
| To CGST Payable A/c | 40000 | |
| SGST Output A/c | 70000 | |
| To SGST Utilization A/c | 50000 | |
| To SGST Payable A/c | 20000 | |
| IGST Output A/c | 50000 | |
| To IGST Utilization A/c | 40000 | |
| To IGST Payable A/c | 10000 |
If after all the above entries are passed, we are left with INPUT Accounts or PAYABLE Accounts and GST PAYABLE on RCM Accounts. Simple Accounting entry or Journal is passed for payment-
| Any Payable A/c (GST/ RCM) | XXXXX | |
| To Bank/ Cash A/c | XXXXX |
Read Also: Updated List of Reverse Charge Mechanism (RCM) with Examples
Please Note: No narrations are given below the entries and the method for passing accounting entries is just a illustrative. There are many others way to do the same.
The author of the above article is Aditya Kishore.
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