The Items and Companies Tax or GST is a single, oblique tax that integrates all oblique taxes inside the Indian financial system. GST is a destination-based consumption tax as it’s charged at each stage, wherever some worth is added to the products or companies, and the provider of the great or service offsets the cost on its inputs of the earlier phases. The cost is offset via the tax credit score mechanism. Finally, the final seller passes on the added GST to the buyer of the products or companies.
The three varieties of taxes underneath GST are:
- Central Items and Companies Tax (CGST): GST levied by the Centre on the Intra-State provide of products or companies i.e provide of products and companies in the identical state.
- State Items and Companies Tax (SGST): GST levied by the State (together with Union Territories with legislatures) on the Intra-State provide (provide of products and companies in the identical state) of products or companies by the State.
- Built-in Items and Companies Tax (IGST): GST collected by the Centre and levied on the Inter-State provide of products or companies. In different phrases, IGST is the entire of CGST and SGST.
Classification of GST for Accounting Functions:
1. Enter CGST/SGST: Enter CGST/SGST is paid on intra-state purchases of products and companies and adjusted in opposition to Output CGST/SGST i.e. GST collected on gross sales.
2. Enter IGST: Enter IGST is paid on inter-state purchases of products and companies and adjusted in opposition to Output IGST i.e. GST collected on gross sales.
3. Output CGST/SGST: Output CGST/SGST is collected on intra-state gross sales or provide of products and companies.
4. Output IGST: Enter IGST is collected on inter-state gross sales or provide of products and companies.
Order of setting off of Enter GST:
Journal Entries (In case of Intra-state provide of products and companies i.e. gross sales inside the similar state):
1. For buy of products:
2. On the market of products:
3. For buy return:
4. For gross sales return:
5. For buy of fastened belongings:
6. For bills paid:
7. For revenue acquired:
8. For items withdrawn by the proprietor for private use:
9. For items given away as free samples/lack of items by fireplace/theft:
10. For setting off Enter CGST in opposition to Output CGST:
11. For setting off Enter SGST in opposition to Output SGST:
12. For cost of GST:
Illustration:
Cross journal entries for the next transactions within the books of Sahil Ltd. assuming that each events belong to the identical state and CGST @6% and SGST @6% are levied:
1. Bought items for ₹1,80,000 from Akanksha & Co.
2. Bought items for ₹3,50,000 to Nupur Retailer.
3. Returned items to Akanksha & Co. for ₹20,000.
4. Nupur Retailer returned items for ₹16,000.
5. Paid for Printing and Stationary ₹10,000.
6. Items withdrawn by the proprietor for private use ₹40,000.
7. Items destroyed by fireplace ₹30,000.
8. Fee made from stability of GST.
Resolution:
Working Notice:
Complete Enter CGST = 10,800 – 1,200 + 600 – 1,200 -900 = ₹6,000
Complete Enter SGST = 10,800 – 1,200 + 600 – 1,200 -900 = ₹6,000
Complete Enter CGST = 21,000 – 960 = ₹20,040
Complete Enter SGST = 21,000 – 960 = ₹20,040
Internet CGST Paid = 20,040 – 6,000 = 14,040
Internet SGST Paid = 20,040 – 6,000 = 14,040
Journal Entries (In case of Inter-state provide of products and companies i.e. gross sales from one state to a different state):
1. For buy of products:
2. On the market of products:
3. For buy return:
4. For gross sales return:
5. For buy of fastened belongings:
6. For bills paid:
7. For revenue acquired:
8. For setting off Enter IGST in opposition to Output IGST:
9. If Enter IGST exceeds the Output IGST, Enter IGST will likely be first adjusted in opposition to CGST, and the stability, if any, will likely be adjusted in opposition to setting off SGST.
Illustration:
Cross journal entries for the next transactions within the books of Sahil Ltd. of Noida, Uttar Pradesh assuming CGST @6% and SGST @6% are levied:
1. Bought items for ₹6,00,000 from Sayeba & Co. of Patna, Bihar.
2. Bought items for ₹1,00,000 from Gaurav Retailer of Varanasi, Uttar Pradesh.
3. Bought items costing ₹1,60,000 to Ishika of Ranchi, Jharkhand at a revenue of 25% on price much less 10% Commerce Low cost.
4. Bought items costing ₹5,00,000 to Shubham of Allahabad, Uttar Pradesh at a revenue of 60% on price much less 15% Commerce Low cost in opposition to cheque which was deposited into the financial institution.
5. Paid for Commercial ₹16,000.
6. Bought a pc for workplace use for ₹60,000 and cost was made by cheque.
7. Proprietor withdrew ₹20,000 for his private use.
8. Fee made from the stability quantity of GST.
Resolution:
