Accounting Entries to be passed under GST

Introduction

Goods and Services Tax (GST) has replaced many indirect taxes, like services tax, excise duty, sales tax, VAT etc. It levies on supply of goods or services. After introduction of GST, businessmen are facing many problems and passing of accounting entries for GST is one of them.

Accounting concept under pre and post GST regime is similar, like input tax should be debited and

output tax liability should be credited. From accounting perspective, changes are in nomenclatures of accounts. For example, earlier the nomenclature was Input Service Tax, but now it needs to be changed to Input GST.

Accounting entries under GST

Accounting entries under GST regime depends upon the events. Events can be:

1.		Receipt of goods or services;
2.		Supply of goods or services;
3.		Receipt or supply of goods or services under Reverse Charge Mechanism (RCM);
4..		Payment of GST.

Further, there are three categories of GST, Central GST (CGST), State/Union Territory GST (S/UTGST), and Integrated GST (IGST). Considering the above, there can be 6 type of accounts or ledgers in accounting books i.e.:

(i)		Input CGST;
(ii)		Input S/UTGST
(iii)		Input IGST;
(iv)		Output CGST;
(v)		Output S/UTGST; and
(vi)		Output IGST.

1. Receipt of goods or services

In case of receipt/purchase of goods or services, a taxable person should pass following accounting entries:

In case of Intra-state transaction:
Purchase/Service expenditure A/c		Dr.	XXXX
Input CGST A/c		Dr.	XXXX
Input S/UTGST A/c		Dr.	XXXX
	To Creditors A/c		XXXX
In case of Inter-state transaction:
Purchases/Service expenditure A/c		Dr.	XXXX
Input IGST A/c		Dr.	XXXX
	To Creditors A/c		XXXX

2. Supply of goods or services

In this case, a taxable person is required to determine time of supply of goods or services as per CGST Act, 2017.

(A) When time of supply is the date of invoice

Accounting entries in case of supply of goods or services by a taxable person

In case of Intra-state supply		Dr.	XXXX
Debtors A/c			XXXX
	To Sales/Service income A/c
	To Output CGST A/c		XXXX
	To Output SGST A/c		XXXX
In case of Inter-state supply
Debtors A/c		Dr.	XXXX
	To Sales/Service income A/c		XXXX
	To Output IGST A/c		XXXX

(B) When time of supply is the date of payment

Under GST if a taxable person (supplier) receives payment (partly or fully) for supply of goods or services in advance, GST is levied on that amount. In such case, the payment is considered as inclusive of GST.

It is advisable to create these three additional ledgers in the books:

(a)		Output CGST (Advance) A/c;
(b)		Output SGST (Advance) A/c; and
(c)		Output IGST (Advance) A/c.

Example: On 15/10/2017, A entered into an agreement with B for supply of fans of Rs. 2, 00,000 (exclusive of GST) to be delivered on 10/11/2017. B made an immediate advance payment of Rs. 1, 10,000 and will pay balance amount on delivery of fans. Assume, GST rate on fans is 10% (CGST 5% and SGST 5%).

Accounting entries in the books of A:

(i)	Accounting entries in case of Intra-state supply
	At the time of receipt of advance payment
	Cash/Bank A/c		Dr.	1, 10,000
		To Party's A/c		1, 00,000
		To Output CGST (Advance) A/c		5,000
		To Output SGST (Advance) A/c		5,000
	At the time of issue of invoice
	When invoice is issued in succeeding months of advance received
	Party's A/c		Dr.	2, 10,000
		To Sales/Service income A/c		2, 00,000
		To Output CGST A/c [Total liab.. (10,000)- Already paid (5,000)]		5,000
		To Output SGST A/c [Total liab. (10,000)- Already paid (5,000)]		5,000
	OR
	When invoice is issued in same month in which advance received
	Party's A/c		Dr.	2, 10,000
	Output CGST (Advance) A/c		Dr..	5,000
	Output SGST (Advance) A/c		Dr.	5,000
		To Sales/Service income A/c		2, 00,000
		To Output CGST A/c		10,000
		To Output SGST A/c		10,000
(ii)	Accounting entries in case of Inter-state supply
	At the time of receipt of advance payment
	Cash/Bank A/c		Dr.	1, 10,000
		To Party's A/c		1, 00,000
		To Output IGST (Advance) A/c		10,000
	At the time of issue of invoice
	When invoice is issued in succeeding months of advance received
	Party's A/c		Dr.	2, 10,000
		To Sales/Service income A/c		2, 00,000
		To Output IGST A/c [Total liab. (20,000)- Already paid (10,000)]		10,000
	OR
When invoice is issued in same month in which advance received
	Party's A/c		Dr.	2, 10,000
	Output IGST (Advance) A/c		Dr.	10,000
		To Sales/Service income A/c		2, 00,000
		To Output IGST A/c		20,000

(C) When time of supply is the date of provision of service (applicable only in case of supply of services)

Under GST, in case of supply of service, time of supply may be determined as the date on which service is completed. In such case, GST liability arises as on the date of completion.

(i)	Accounting entries in case on Intra-state supply
	At the time of provision of service
	Party's A/c		Dr.	XXXX
		To Output CGST A/c		XXXX
		To Output SGST A/c		XXXX
	At the time of issue of invoice
	Party's A/c		Dr.	XXXX
		To Service income A/c		XXXX
(ii)	Accounting entries in case of Inter-state supply
	At the time of provision of service
	Party's A/c		Dr.	XXXX
		To Output IGST A/c		XXXX
	At the time of issue of invoice
	Party's A/c		Dr.	XXXX
		To Service income A/c		XXXX

3. Receipt or Supply of goods or services under RCM

Under RCM, recipient of certain specified goods or services is required to pay GST. After payment of GST liabilities, recipient can book the input credit of GST paid. As there is separate disclosure of GST liability under RCM in the GST Return, it is advisable to create following ledgers:

(i)		Input CGST- RCM;
(ii)		Input S/UTGST- RCM;
(iii)		Input IGST- RCM;
(iv)		Output CGST- RCM;
(v)		Output S/UTGST- RCM; and
(vi)		Output IGST- RCM.

The recipient can pass following accounting entries in his books:

(A) Receipt of goods or services under RCM

The recipient is required to determine time of supply as per CGST Act, 2017. [The below scheme of entries is presuming date of 'time of supply' and date on which invoice is received do not co-inside].

(i)	Accounting entries in case of Intra-state supply
	On the date of 'time of supply'
	Purchases/Service expenditure A/c				Dr.	XXXX
		To Output CGST- RCM A/c				XXXX
		To Output SGST- RCM A/c				XXXX
	On the date of payment of GST liabilities
	(1)	Output CGST- RCM A/c			Dr.	XXXX
		Output SGST- RCM A/c			Dr.	XXXX
				To Bank A/c		XXXX
	(2)	Input CGST- RCM A/c			Dr.	XXXX
		Input SGST- RCM A/c			Dr.	XXXX
				To Purchases/Service expenditure A/c		XXXX
	On receipt of invoice
	Purchases/Service expenditure A/c				Dr.	XXXX
			To Creditors A/c			XXXX
(ii)	Accounting entries in case of Inter-state supply
	On the date of time of supply
	Purchases/Service expenditure A/c				Dr.	XXXX
			To Output IGST- RCM A/c			XXXX
	On the date of payment of GST liabilities
	(1)		Output IGST- RCM A/c		Dr.	XXXX
			To Bank A/c			XXXX
	(2)		Input IGST- RCM A/c		Dr.	XXXX
				To Purchases/Service expenditure A/c		XXXX
	On receipt of invoice
	Purchases/Service expenditure A/c				Dr.	XXXX
			To Creditors A/c			XXXX

(B) Supply of goods or services under RCM

Only one entries should be passed at the time issue of invoice.

Debtors A/c		Dr.	XXXX
	To Sales/Service income A/c		XXXX

4. Payment of GST

GST liabilities can be discharged either by utilisation of input credit or by making payment or by both. Input credit should be utilised in following manner:

a.		CGST Credit- first to pay CGST and then IGST
b.		SGST Credit- first to pay SGST and then IGST
c.		IGST Credit- first to pay IGST, then CGST and then SGST

Accounting entries:

For payment of CGST liability
Output CGST A/c		Dr.	XXXX
	To Input CGST A/c		XXXX
	To Input IGST A/c		XXXX
For payment of SGST liability
Output SGST A/c		Dr.	XXXX
	To Input SGST A/c		XXXX
	To Input IGST A/c		XXXX
For payment of IGST liability
Output IGST A/c		Dr.	XXXX
	To Input IGST A/c		XXXX
	To Input CGST A/c		XXXX
	To Input SGST A/c		XXXX
For payment of balance GST liability
Output CGST A/c		Dr.	XXXX
Output SGST A/c		Dr.	XXXX
Output IGST A/c		Dr.	XXXX
	To Bank A/c		XXXX