GST Accounting Entries – A Simple Guide for You!
If you’re running a business, keeping your GST accounts in order is crucial. Every time you buy or sell goods or services, you need to record the GST transactions properly. This ensures you claim Input Tax Credit (ITC) correctly and pay the right tax to the government on time. GST accounting entries involve recording transactions related to the purchase, sale, and payment of GST.
Let’s break it down step by step so you can easily understand and apply GST accounting entries in your books!
Purchase of Goods/Services (Input supplies)
Whenever you buy something, you pay GST to the supplier. You can later claim this tax as Input Tax Credit (ITC). In the case of purchasing you record transactions as Input GST (IGST, CGST, SGST) separately. Therefore, depending on whether it’s an Indra-state (within the same state) or inter-state (between states) purchase, the entries will differ.
For Intra-State Purchases (CGST + SGST):
| Accounts Involved | Debit (Dr.) | Credit (Cr.) |
|---|---|---|
| Purchase A/c | ₹50,000 | |
| Input CGST A/c (9%) | ₹4,500 | |
| Input SGST A/c (9%) | ₹4,500 | |
| To Supplier A/c | ₹59,000 |
For Interstate Purchase (IGST applies)
| Accounts Involved | Debit (Dr.) | Credit (Cr.) |
|---|---|---|
| Purchase A/c | ₹50,000 | |
| Input IGST A/c (18%) | ₹9,000 | |
| To Supplier A/c | ₹59,000 |
Sale of Goods/Services (Output Supplies)
When you sell something, you collect GST from your customer. In such case you records the output GST (IGST, CGST, SGST) separately.
This tax must be paid to the government, but don’t worry – you can adjust it with your Input GST (ITC).
For Intra-State Sales (CGST + SGST):
| Accounts Involved | Debit (Dr.) | Credit (Cr.) |
|---|---|---|
| Customer A/c | ₹1,18,000 | |
| To Sales A/c | ₹1,00,000 | |
| To Output CGST A/c (9%) | ₹9,000 | |
| To Output SGST A/c (9%) | ₹9,000 |
For Inter-State Sales (CGST + SGST):
| Accounts Involved | Debit (Dr.) | Credit (Cr.) |
|---|---|---|
| Customer A/c | ₹1,18,000 | |
| To Sales A/c | ₹1,00,000 | |
| To Output IGST A/c (18%) | ₹18,000 |
Adjusting GST Payable with ITC
Now, instead of paying the full ₹18,000 GST, you can reduce this liability by using the ₹9,000 ITC you earned from your purchases.
For Intra-State Transactions:
| Accounts Involved | Debit (Dr.) | Credit (Cr.) | Explanation |
|---|---|---|---|
| Output CGST A/c | ₹9,000 | Adjustment of GST payable | |
| Output SGST A/c | ₹9,000 | Adjustment of GST payable | |
| To Input CGST A/c | ₹4,500 | ITC used (Central) | |
| To Input SGST A/c | ₹4,500 | ITC used (State) | |
| To GST Payable A/c | ₹9,000 | Final GST liability |
Instead of paying ₹18,000, you now only owe ₹9,000 after using or adjustment of your ITC.
For Inter-State Transactions:
| Accounts Involved | Debit (Dr.) | Credit (Cr.) | Explanation |
|---|---|---|---|
| Output IGST A/c | ₹18,000 | Adjustment of GST payable | |
| To Input IGST A/c | ₹9,000 | ITC used (IGST) | |
| To GST Payable A/c | ₹9,000 | Final GST liability |
Paying the Remaining GST to the Government
After adjusting ITC, the remaining GST amount must be paid to the government.
| Accounts Involved | Debit (Dr.) | Credit (Cr.) | Explanation |
|---|---|---|---|
| GST Payable A/c | ₹9,000 | Liability cleared | |
| To Bank A/c | ₹9,000 | GST paid to the government |
After this entry, your GST liability is cleared, and you’re fully compliant.
Key Points to Remember:
- Maintain separate ledgers for Input CGST, Input SGST, Input IGST, Output CGST, Output SGST, and Output IGST.
- Ensure proper reconciliation of GST returns (GSTR-1, GSTR-3B) with accounting records.
- File GST returns on time to avoid penalties.
These entries are general guidelines and may vary based on specific business scenarios. Always consult a tax professional for accurate compliance.