GST Computation & Accounting
What is Output GST?
GST on sale is called output GST.
What is Input GST?
GST on purchase is called input GST.
What is GST payable?
GST on purchase is called input GST.
| Computation of Net Tax Liability of XYZ ltd. | |
|---|---|
| Raw Material | 800,000 |
| Add:CGST@14% | 112,000 |
| Add:SGST@14% | 112,000 |
| Total | 1,024,000 |
| Input tax credit | |
|---|---|
| CGST | 112,000 |
| SGST | 112,000 |
| Cost of Raw Material | 800,000 |
| Add: Processing charges | 600,000 |
| Cost | 1400000 |
| Add: Profit @ 30% of 1,400,000 | 140000 |
| Transaction Value | 1,820,000 |
| Add: Output CGST @ 14% | 254,800 |
| Add: Output SGST @ 14% | 254,800 |
| Total | 2,329,600 |
| Computation of Net Tax | |
|---|---|
| CGST | |
| Output tax | 254,800 |
| Less: ITC Raw material – CGST | (112,000) |
| Net Tax | 142,800 |
| SGST Output tax | 254,800 |
| Cost | 1400000 |
| Less: ITC Raw material – SGST | (112,000) |
| Net Tax | 142,800 |
| Computation of Net Tax Liability of PQR Limited | |
| Purchase price of whole seller | 2,329,600 |
| Less: ITC Goods – CGST | (254,800) |
| Less: ITC Goods – SGST | (254,800) |
| Computation of GST | |
|---|---|
| Cost to Wholesaler | 1,820,000 |
| Add: Profit @ 20% of 1820000 | 364,000 |
| Transaction Value | 2,184,000 |
| Add: CGST @ 14% | 305,760 |
| Add: SGST @ 14% | 305,760 |
| Total | 2,795,520 |
| Computation of Net Tax | |
|---|---|
| CGST | |
| Output tax | 305,760 |
| Less: ITC Goods – CGST | (254,800) |
| Net Tax payable | 50,960 |
| Computation of Net Tax | |
|---|---|
| SGST | |
| Output tax | 305,760 |
| Less: ITC Goods – SGST | (254,800) |
| Net Tax payable | 50,960 |
Accounting Treatment under GST:
In the GST regime, a taxpayer must keep all kinds of accounts and records related to GST transactions, such as Input Supplies (Purchase), Output Supplies (Sale), Production, Input Credit, Output Tax, Inventories, Import-Export, Reverse charge, etc.
| List Ledger Accounts To Maintain Under GST Regime |
|---|
| CGST Payable A/c(Tax on Intra-State Outward Supplies ) |
| CGST Input Credit A/c (Input Tax on Intra-State Inward Supplies) |
| SGST Payable A/c (Tax on Intra-State Outward Supplies) |
| SGST Input Credit A/c (Input Tax on Intra-State Inward Supplies) |
| IGST Payable A/c (Tax on Intra-State Outward Supplies) |
| IGST Input Credit A/c (Input Tax on Intra-State Inward Supplies) |
| Electronic Cash Ledger (to be maintained on GST Portal (gst.gov.in) |
Journal Entries under GST
1. Purchase Transactions
(Input Supplies of Goods or Services)
A. Intra-State Purchase
Purchase A/c ______________Dr.
CGST Input Credit A/c _______Dr.
SGST Input Credit A/c _______Dr.
To Creditors A/c ____________________________
B. Inter-State Purchase
Purchase A/c _____________ Dr.
IGST Input Credit A/c _______Dr.
To Creditors A/c _________________________
2. Sale Transactions
(Outward Supplies of Goods and Services)
A. Intra-State Purchase
Debtors A/c _____________Dr.
To Sales A/c
To CGST Payable A/c
To SGST Payable A/c
B. Inter-State Purchase
Debtors A/c _____________Dr.
To Sales A/c
To IGST Payable A/c
3. Set Off of Input Credit against Out Tax Liability of GST
Under the GST law, the set-off of input credit is allowed in the following order:-
| Input Credit | Order Of Set Off of Input Credit Against Output Liability |
|---|---|
| IGST | First Towards IGST Balance Toward CGST & SGST in any order & in any proportion Note: ITC on account of IGST is mandatory to be completed exhausted first |
| CGST | First Toward CGST Balance Toward IGST |
| SGST | First Toward SGST Balance Toward IGST |
We can understand the order of input credit set off and its journal entries with an example:
Example – Month End Details (Total Balances):
CGST Payable (Output) A/c – Rs. 50,000
CGST Input Credit A/c – 30000
SGST Payable (Output) A/c –Rs. 50,000
SGST Input Credit A/c -30000
IGST Payable (Output) A/c – Rs. 80000
IGST Input Credit A/c – 100000
Set Off At the end of the Month:
| Input Credit | IGST Payable Rs.80000 | CGST Payable Rs.50000 | SGST Payable Rs.50000 |
|---|---|---|---|
| IGST Input Credit | Rs.80000 | Rs. 20000 | – |
| CGST Input Credit | – | Rs.30000 | – |
| SGST Input Credit | – | – | Rs.30000 |
| Electronic Cash Ledger | – | – | Rs. 20000 |
| Ledger | – | – | – |
| Total | Rs.80000 | Rs.50000 | Rs.50000 |
Note: Alternatively, we can set-off remaining Rs. 20,000 ITC of IGST to SGST & accordingly Rs. 20,000 on account of CGST to be paid through Electronic Cash Ledger.
Accounting Entries for GST Set off and Cash/Bank Payment
1. CGST Payable A/c__________ Dr 50000
To CGST Input Credit A/c 30000
To IGST Input Credit A/c 20000
2. SGST Payable A/c__________ Dr 50000
To SGST Input Credit A/c 30000
To Electronic Cash Ledger A/c 20000
3. IGST Payable A/c__________ Dr 80000
To IGST Input Credit A/c 80000
Note: Electronic Cash Ledger is the online account (kind of e-wallet) maintained on Government GST portal to pay GST in cash/bank.