Accounting Entries Under GST (Goods And Services Tax)

What new needs to be done in accounting for GST?

Earlier different accounts were required for the accounting of different taxes such as VAT, CST, CENVAT, Excise duty, Various Countervailing duties etc.

However, under the New GST regime, the different taxes have been subsumed in GST. So the number of accounts required to be created has reduced drastically. Now the business has to maintain the Accounts under three major heads that are:

• CGST,
• SGST and
• IGST

A separate account is required under each head for differentiating the tax paid on inputs and tax received on output. Such a treatment enables the business to ascertain the amount of Input GST and Output GST separately. The separate treatment will enable the business to determine easily the amount of tax liability. He is required to pay under GST and the amount that is available for him to take credit.

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Major accounts to be created under GST

So the major accounts that are required to be created under GST for accounting purpose are as follows:

For making the payment, an additional account is required to be created as Electronic Cash Ledger which is to be maintained on GST portal and used for paying the tax liability.

Now let’s understand these accounts with the help of an example:

Mr. Harish a Cement dealer has done some transaction in the month of April 2019 and requires to ascertain his tax liability and the entries needed to be done in books of accounts. The transactions are as follows:

• Purchases cement from the local registered manufacturer for ?150000.
• Purchases cement from a dealer registered outside his state for ?70000.
• Purchase of materials and packing bags for ? 40000.
• Sale within the state amounted to ?100000.
• Sale made outside the state amounted to ?60000.
• Paid legal consultation fee to a CA an amount of ? 20000.

The GST rate applicable to Cement is 28% and the same for the packaging material. Moreover, for the professional fee, the rate is 18%

The total amount of Tax under different categories are as follows:

• Total Input IGST is ?19600
• Total Input SGST is ?28400
• Total Input CGST is ?28400
• Total Output IGST is ?16800
• Total Output SGST is ?14000
• Total Output CGST is ?14000

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The credit of input tax can be claimed as follows:

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The credit can be allocated as specified in the table

The Extra Input Tax can be carried forward or can be claimed as a refund.

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The accounting entries for setting off the Tax liabilities with credit is as follows:

At the time of filing the annual return GSTR-9, the business is required to reconcile the balance as per the return, and the balance shown in the books of accounts and adjust the books or return accordingly if some error is discovered.

Whether the introduction of GST has actually benefited and eased the procedures in Finance and accounts or it has increased the hardships??This would be a tough thing to be concluded for now. ormally, introduction of any new law or provision is seen negative in the transitional phase. So is the case with GST. The most appropriate thing at the moment would be to let us wait for some more time till GST rolls out in its complete sense in the economy and then analyse the ease or hardship status of the stakeholders.

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