Asian Research Journal of Business Management Issue 2 (Vol.

5)2017 Issn: 2321-9246

DOI:10.24214/ARJBM/5/2/1230 Research Article

CODEN: ARJBAX

Asian Research Journal of Business Management

The Goods and Services Tax Regime in India: An Accounting Perspective

Vartika Sahu1, Somesh Kumar Shukla2

1Research scholar, Department of Commerce University of Lucknow, India

2Professor and Dean, Faculty of Commerce University of Lucknow, India.

Received: 14 October 2017; Revised:1 December 2017; Accepted:5 December 2017

Abstract: This paper presents an accounting perspectives under a country-wide ambitious indirect tax
regime, the GST. The GOI has introduced a single tax regime for both goods and services for the
entire country (except J&K) with the roll out the GST w.e.f. July 1, 2017. The GST is a comprehensive
consumption based tax on supply of goods or of services or both and subsumed the majority of indirect
taxes into a single tax basket. In view of the majority of indirect taxes being merged into one tax,
impact is expected to be almost every business operation in India. The main goal of the GST regime is
‘one tax one market’, which aims at providing a cohesive tax approach across country. Previously, we
would have maintained individual accounts for each. But from an accounting perspective under the
GST regime, entities will have to make certain changes to their accounting system and processes
including charts of accounts (COA).
Keywords: Goods and Services Tax, Accounting Treatment: Financial records and Journal
entries.
JEL Classification: M4

INTRODUCTION

The Goods and Services Tax, addressed as the aspiring tax reform, is not only limited to
changes in the tax structure, but also comprehends the overhaul of the entire business financial
processes along with the recording, accounting and financial reporting structure. This is likely
to create a comprehensive impact on the treatment of GST in financial statements and chart of
accounts. As a result, the accounting system in companies will witness significant changes in
input supplies, output supplies, production, stock, financial and revenue reporting, import-
export, calculation of tax liability, reverse charge, and the way tax credit is written off [1]. To
fully assimilate the impact, companies will need to figure out the changes GST will bring on
the financial reporting and indirect tax accounting. Consequently, companies will be able to
evaluate the reshuffle in accounting and financial reporting for a correct revenue
recognizance.
In previous, accounting treatment of various indirect taxes were covered under the Indian
Accounting Standards (IAS) where various taxes were treated based on their nature and the
point of levy. For instance, excise duty was included in revenue since it was origin based or
production based tax. On the other hand, sales tax and VAT being levied at the time of sales
was not taken into account while calculating revenue. Because of several indirect taxes and

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hence, there are usually many tax related general ledger codes in the COA used for financial
reporting.
GST is a consumption or destination based tax, [1] which implies that all tax components will
levied at all points in the supply chain. Hence, the state that will collect taxes will be decided
by the place of consumption. As a result, while projecting revenue under GST structure,
companies will witness volatility in the reported revenue numbers, which may not reflect their
true and fair financial status to the stakeholders. Experts suggest that companies may find non
GAAP reporting useful in these cases to correctly portray their earnings.

Accounts and Records under GST

Key points that are significant from perspective of maintenance of accounts and
records

Assessment in GST is mainly focused on self-assessment by the taxpayer’s themselves. This requires certain
obligations to be cast on the taxpayers for keeping and maintaining accounts and records.

Section 35 of the CGST Act and “Accounts and Records” Rules (hereinafter referred to as rules) provide that every
registered person shall keep and maintain all records at his principal place of business. It also provides that every
registered person whose turnover during a financial year exceeds the prescribed limit shall get his accounts audited
by a chartered accountant or a cost accountant.

Section 35 provides that every registered person shall keep and maintain, at his principal place of business, as
mentioned in the certificate of registration, a true and correct account of production or manufacture of goods,
inward and outward supply of goods or of services or both, stock of goods, ITC availed, output tax payable and paid,
import-export of goods and services and supplies attracting payment of tax on reverse charge.

In case more than one place of business is specified in the certificate of registration, the accounts relating to each
place of business shall be kept at such places of business. A registered person may keep and maintain such accounts
and other particulars in electronic form in such manner as may be prescribed.

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Following accounts and records will have to be

maintained by every registered person:
The book of accounts shall be kept at the principal
place of business and at every related places of
business mentioned in the certificate of registration.
Any entry in registers, accounts and documents shall
not be erased, effaced or overwritten and all incorrect
entries, other than those of clerical nature, shall be
scored out under attestation and thereafter the
correct entry shall be recorded and where the
registers and other documents are maintained
electronically, a log of every entry edited or deleted
shall be maintained. Further each volume of books of
account maintained manually by the registered person
shall be serially numbered.
(a) Accounts of stock in respect of goods received
and supplied
(b) A separate A/c’s of advance received, paid and
adjustments made thereto
(c) An A/c containing the details of tax payable,
collected and paid during any tax period
(d) Names and complete address of suppliers from
whom goods or services chargeable to tax under
the act, has been received
(e) Names and complete address of the persons to
whom supplies have been made
(f) Complete addresses of the premises where the
goods are stored
(g) Monthly production accounts showing the
quantitative details of raw material or services
(h) Accounts showing the quantitative details of
goods used in the provision of services
(i) Separate A/c’s of works contract

Period for preservation of accounts: All accounts maintained together with all invoices, bills of supply, credit and debit
notes, and delivery challans relating to stocks, deliveries, inward supply and outward supply shall be preserved for seventy
two months (six years) from the due date of furnishing of annual return for the year pertaining to such accounts and
records and shall be kept at every related place of business mentioned in the certificate of registration.

Electronic Records: The following requirements have been prescribed for maintenance of records in electronic form.
Proper Electronic back-up of records, Produce, on demand, the relevant records or documents, duly authenticated, in
hard copy or in any electronically readable format.

Records to be maintained by owner or operator of godown or warehouse and transporters: The transporters, owners or
operators of godowns, if not already registered under the GST Act(s), shall submit the details regarding their business
electronically on the Common Portal in FORM GST ENR-01. A unique enrolment number shall be generated and
communicated to them. A person in any other State or Union territory shall be deemed to be enrolled in the State or
Union Territory.

Every person engaged in the business of transporting goods shall maintain records of goods transported, delivered and
goods stored in transit by him and for each of his branches. Every owner or operator of a warehouse or godown shall
maintain books of accounts, with respect to the period for which particular goods remain in the warehouse, including
the particulars relating to dispatch, movement, receipt, and disposal of such goods. The goods shall be stored in such
manner that they can be identified item wise and owner wise and shall facilitate any physical verification or inspection,
if required at any time.

Fig. 1: Key points that are significant from perspective of maintain of accounts and records [2,
3].

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Accounting Entries - Financial Records
Goods and Services Tax is a one tax, subsume not only all indirect taxes such as excise,
customs (only CVD & SAD), service tax, CST, VAT etc. but also simplifying business and
accounting processes. Initially, there may be certain transitional challenges but in long term,
GST will bring in much clarity in many areas of business. Accounting and bookkeeping are
one of the areas, which will ensure more transparency in business reporting and compliance
[2].
In the GST law, the taxpayer is required to maintain certain documents and all types of
accounts and records in respect of manufacturing, trading or provision of services related to
GST transactions such as input supplies, output supplies, production, input credit, output
tax, Stock, Import-export, reverse charge[3] etc. In this chapter, we will discuss all the
aspects to maintenance of accounts and records related to GST in the books of accounts.
Accounting scenario - under previous indirect taxation structure and GST regime

In the previous scenario, there were various types of taxes such as excise, custom, VAT, CST
and service tax etc. for different business transactions and cross utilization of input credit was
not allowed. Therefore, a taxpayer required to separate ledger accounts for every tax law. A list
of the few accounts was required to maintain in previous indirect tax by the manufacturer,
trader or businessman (apart from accounts like purchase, sale, and stock). For e.g., a trader Mr.
A must maintain the minimum basic accounts.

 Output VAT A/c

 Input VAT A/c
 CST A/c (for inter-state purchases and sales)
 Service Tax A/c (a trader is not able to claim any service tax input credit with output VAT.
Service tax could not be set off against VAT/CST)

Under the GST regime, all indirect taxes are subsumed into one account and there is dual GST
structure based on intra-state supplies and inter-state supplies. The CGST (Central Goods and
Services Tax) and SGST (State Goods and Services Tax) is a charge on intra-state supplies
whereas IGST (Integrated Goods and Services Tax) is a charge on all inter-state
supplies[1].Therefore, a taxpayer separate ledger accounts are required to maintain related to
CGST, SGST and IGST[3]. The same trader Mr. A is now required to maintain the following
A/c’s (apart from A/c’s like purchase, sale and stock).
 Input CGST A/c
 Output CGST A/c
 Input SGST A/c
 Output SGST A/c
 Input IGST A/c
 Output IGST A/c
 Electronic Cash Ledger (to be maintain on Government GST portal to pay GST)
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Ledger accounts were required to be Ledger accounts to be maintained under GST regime
maintained under previous tax regime
Accounts Taxpayer Accounts Remark

Excise Payable Manufacturer CGST Payable A/c Tax on Intra-State outward

A/c supplies
Cenvat Credit Manufacturer CGST Input Credit A/c Input tax on Intra-State Inward
A/c supplies
VAT Payable Trader/Manufacturer SGST Payable A/c Tax on Intra-State outward
A/c supplies
VAT Input Trader/Manufacturer SGST Input Credit A/c Input tax on Intra-State Inward
Credit A/c supplies
CST A/c Trader/Manufacturer IGST Payable A/c Tax on Inter-State outward
(for inter-state supplies
purchases and sales) IGST Input Credit A/c Tax on Inter-State Inward supplies
Service Tax Service Provider4 Electronic Cash Ledger To be maintained on GST portal
Payable A/c A/c
Service Tax Service Provider
Credit A/c /Manufacture but not
allowed to trader4

Fig. 2: Ledger accounts maintain under previous and under GST regime.

Electronic Cash & Credit Ledger

The mechanism of GST e-ledger or electronic ledger is the statement of cash and input tax
credit in respect of a registered taxpayer. Once a taxpayer register for GST in Government
portal, he will get access to three type of electronic ledgers and once a taxpayer make payment
of GST tax by cash, cheque, internet banking, RTGS or NEFT the amount is credited in their
respective electronic ledgers namely:
 Electronic Cash Ledger: The E-cash ledger serves as an e-wallet and can be used by the
taxpayer to make any payment of tax, interest and penalties.
 Electronic Credit Ledger: The E-credit ledger will contain the input tax credit fetched
from the taxpayer’s monthly returns. The credit will be of three types such as CGST, SGST
and IGST. This credit amount can only be used for to pay tax and cannot be used for any
other purposes.
 Electronic Liability Ledger: The E-liability ledger will contain the taxpayer’s total tax
liability for a particular month.
These two legers are generated once after registering with the common portal of GST called
GSTN (Goods and Services Tax Network) by a taxpayer.
Types of Accounts and Records maintained under GST [2, 3, 4].
Table 1: The registered taxpayer should keep and required following types of accounts and
other records.

Accounts/Records Information Config

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Required uration
Sale (outward supply) All particulars of  Percentage wise
outward supply of
goods and services
made within a tax
period including the
name and complete
address of buyer
must be maintain
Purchase (Inward All details of Inward  Rate wise
Supply) Supply of Goods and
Services made
within a tax period
for purchase of
goods by
manufacturer/trader
or provision of
services including
the name and
complete address of
supplier.
Production All the details of Every
Goods assessee
Manufactured or carrying
Produced in a out
factory or manufac
production house by turing
the Taxpayer activity
Customer / Vendors All the details of  Name
Accounts (Multiple vendors.  Address
GSTIN)  State
 GSTN
 PAN
Stock of Goods This accounts  Item Name
Received and register should  HSN Code/SAC Code
Supplied. contain opening  Tax Rate
balance, receipt,  Unit of Measurement
supply, goods lost,
stolen,
destroyed, written
off or disposed of by
way of gift or free
samples and closing
balance of stock
including raw
materials, finished
goods, scrap and
wastage thereof
Transaction Time Select the followings:

 Revenue Ledger
 Party Ledger
 Item
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Input Tax Credit This register should All
Availed maintain the Assessee
information of input
tax credit availed on
inward supplies of
goods and services
for a given tax
period
Output Tax Liability This register should All
maintain the detail Assessee
information of GST
liability outstanding
to be adjusted
against input credit
or paid out directly
for a given tax
period.
Tax Paid Details of tax All
payable, tax paid by Assessee
utilization of input
credit and tax paid
for a particular tax
period.
Import All information Every
related to Goods or assessee
Services Imported carrying
for a given tax out
period. import
activity
Export All the details of Every
Goods or Services assessee
Exported for a given carrying
tax period. out
export
activity
Reverse Charge Details of outward All
(Outward Supplies) supplies of goods or Assessee
services on which
tax is payable under
reverse charge.
Reverse Charge Information of All
(Inward Supplies) inward supplies Assessee
attracting tax under
reverse.
Advances Received Details of Advances All
received by the Assessee
taxpayer and
adjustments made
thereto.
Advances Paid Information of All
advances paid and Assessee
adjustments made
thereto.
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List of Ledgers to be Created

If multiple GSTIN Books are maintained in same entity additional ledgers may be
created as per the requirement
Current Assets Current Liabilities
Input CGST A/c 9% Output CGST A/c
Input SGST A/c 9% Output SGST A/c
Input IGST A/c 18% Output IGST A/c
Input CGST RCM A/c 9% Output CGST (Advance) A/c
Input SGST RCM A/c 9% Output SGST (Advance) A/c
Input IGST RCM A/c 18% Output IGST (Advance) A/c
Input CGST URD A/c CGST Advance A/c
Input CGST URD A/c SGST Advance A/c
Input CGST URD A/c 9% Output CGST URD A/c (Liability)
Input CGST Ledger A/c 9% Output SGST URD A/c (Liability)
Input SGST Ledger A/c 18% Output IGST URD A/c (Liability)
Input IGST Ledger A/c 9% Output CGST RCM A/c (Liability)
Provisional ITC CGST A/c 9% Output SGST RCM A/c (Liability)
Provisional ITC SGST A/c 18% Output IGST RCM A/c (Liability)
Provisional ITC IGST A/c IGST Advance A/c
Electronic Cash CGST Ledger A/c *Note: Here only 18% GST rate is consider.
Electronic Cash SGST Ledger A/c Similar entries apply for other rate of taxes.
Electronic Cash IGST Ledger A/c
Cash/ Bank A/c

Sales A/c Current Liabilities

Local B2B Sales A/c Liability Ledger CGST A/c
Local B2C Sales A/c Liability Ledger SGST A/c
Interstate B2B Sales Liability Ledger IGST A/c
Interstate B2C Sales

Direct Expenses A/c Indirect Expenses A/c

Direct Expenses Registered A/c Indirect Expenses Registered A/c
Direct Expenses Unregistered A/c Indirect Expenses Unregistered A/c

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Purchases A/c Sundry Creditors
Local Purchase A/c Creditors – Registered
Interstate Purchase A/c Creditors – Unregistered
Local RCM Purchase A/c
Interstate RCM Purchase A/c Creditors – Registered
URD Purchase A/c Vendor A/c – Registered
Import A/c Vendor A/c – Unregistered
Local Composition Dealer Purchase A/c
Interstate Composition Dealer Purchase A/c Sundry Debtors
Exempt and NIL Rate Purchase A/c Debtors

Fig. 3: List of Ledgers may be created under GST regime

Maintenance of all Relevant Documents & Important points related to Accounts and
Records [3].
Documents: The taxpayer should keep and maintain all the important documents including
Invoices, bills of supply, delivery challans, credit notes, debit notes, receipt vouchers,
payment vouchers, refund vouchers and e-way bills.
Place of Maintenance of Accounts & Records: The taxpayer shall keep the books of
accounts and other records at the principal place of business. If multiple places of business are
specified in the certificate of GST registration, then accounts and records shall be kept at the
related business places.
Period for Retention: As per the GST law the registered taxpayer shall retain the books of
accounts and other records until the expiry of seventy-two months (6 Years) from the last date
of filing of Annual Return (GSTR-9) for the year related such books of accounts and records
for e.g. Period of Retention for Accounts of FY 2017-18. If the annual return for the FY 2017-
18 is filed on 30.12.2018, then the books of account and other records have to be maintained
till 30.12.2024.
Period of retention, in case of pending proceedings (appeal, revision etc.) is pending before any
GST appellate authority or tribunal of court, then the taxpayer shall retain the books of
accounts related to the subject matters of such proceedings:
o Until the expiry of one year from the date of final disposal proceeding, or The period
specified records under section 42(1), whichever is later
Or
o Until the expiry of six years from the due date of the annual return. Whichever is later?

Records maintenance in Electronic form: The taxpayer can also maintain accounts and other
records in electronic form. The records maintained in electronic form shall be authenticated
through digital signature. The taxpayer shall produce authenticated hard copy of records and
documents whenever demanded by the department.

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Accounting Treatment under GST

So now we are going to discussed all accounting entries pertaining to purchase and sales
transactions (Input or Output supplies of goods or services to intra-state and inter-state), set-off
of input credit against output tax liability, reverse charge transactions for supplier and receiver,
refunds under export of goods or services and import transactions.
Sequence of Set-off of Input Tax Credit against Output Tax Liability [2, 3, 5]
Rules for calculation of tax liability and tax credit
 In case of Intra-State sale, CGST and SGST will be charged and IGST will not be
charged.
 In case of Inter-State sale, only IGST will be charged and no CGST / SGST will be
charged.
 Output CGST will be adjusted only with input CGST and thereafter for IGST.
 Output SGST will be adjusted only with input SGST and thereafter for IGST.
 Cross adjustment of CGST with SGST and SGST with CGST is not allowed
 Output IGST will be adjusted first with Input IGST, then with CGST and last with
SGST.

INPUT CREDIT Set-off of Input credit

against output liability
CGST First toward CGST
Balance towards IGST
SGST First towards SGST
Balance towards IGST
IGST First towards IGST
Secondly towards
CGST
Balance towards SGST

Note: ITC credit of SGST is not available for CGST or vice-a-versa

Fig. 4.1 Fig. 4.2
Fig. 4: INPUT Credit and set-off sequence

BUSINESS TO BUSINESS (B2B) AND BUSINESS TO CONSUMERS (B2C)

TRANSACTIONS

The terms B2B and B2C stands for ‘Business to Business’ and ‘Business to Consumers’,
these two are completely different type of transactions as far as GST is concerned because the
intention of transaction are totally different. B2B and B2C are totally different transactions as
far as GST is concerned. A single common provision in GST could also not be able to deal
with these two transactions impartially. The OECD has also suggested and drafted two
different sets of principles for cross border transaction to deal with B2B and B2C transactions.
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The total transaction volume of B2B is much higher than that of B2C transactions. The most
important reason for this is that in a typical supply chain there will be several B2B transactions
including subcomponents or raw materials, and only one B2C transaction, specifically sale of
the finished product to the ultimate customer. For example, an automobile manufacturer makes
numerous B2B transactions such as buying tires, glass for windscreens, and rubber hoses for its
vehicles. But the final transaction, a finished vehicle sold to the end consumer, is a single
(B2C) transaction.
It might be possible that the subjects of transactions are same for example selling of a Car to a
person who is redesigning or modifying it and then selling it to end consumers on the other
hand a Car sold to the ultimate consumer directly from show room. Even though the subjects in
the transaction are same, but in the first example it will be treated as a B2B transaction and
in the other it will be a B2C transaction.
Due to the following differences, the B2B and B2C transactions are taxed under GST in a
separate manner:
The credit of GSTs (CGST/SGST/IGST) paid in B2B moved through thorough supply chain
where the receiver of supply is paying GSTs and Supplier gets credit of input tax paid at the
time of acquisition. But in B2C transaction the receiver of supply is the ultimate consumer who
shall ultimately endure the all GSTs paid on the final supply and not entitled to get any credit
of GSTs paid by him.
Important aspects to be taken care of B2C Structure
Whenever a dealer is making a transaction, he must take the category in which he applies that
particular transaction, which is classified into two category:
Business to Consumers Transactions
B2C Large B2C Small
It records sales to consumers (Ultimate user of Goods & Services) and Unregistered Dealer
(URD)
It should be Inter-State transaction It might be Intra-State or Inter-State transaction

Transaction having a value above INR 2.5 Lacs. Transaction having a value less than INR 2.5 Lacs at the Inter-
State level and a transaction in Intra-State level with no limit.

Fig. 5: Business to Consumers transaction structure

Reverse Charge Mechanism in GST Regime [3]

The concept of reverse charge mechanism was first time introduced in erstwhile Service Tax
law in India. Generally, tax is payable by the person who provides Services but under reverse
charge mechanism the liability to pay tax has shifted to recipient of Services. The similar
concept of reverse charge mechanism has comprised under GST, but in GST regime
Government of India has notified not only supply of certain Services but supply of certain
goods also. The main objective of reverse charge mechanism is to widen the scope of levy of

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tax on un-organized sectors and give exemption to specific class of supplier of goods or
services and import of services.
Therefore, under reverse charge mechanism the liability to payment of tax has fixed on the
recipient of supply of goods or services in lieu of the supplier or provider in respect of certain
categories of goods or services as notified by the Government.
The supply of goods and the supply of services under reverse charge mechanism has notified
vide Notification no. 4/2017-Central tax (Rate) dated 28.06.2017 and 13/2017-Central Tax
(Rate) dated 28.06.2017 respectively as approved by the GST Council.

Input Tax credit under RCM

A supplier cannot take input tax credit of GST paid on Goods and Services used to make supplies on which the recipient
is liable to pay tax under reverse charge.

Fig.
The recipient can6: Input
avail InputTax Credit
Tax Credit under
of GST Reverse
amount Charge
that is paid Mechanism
under reverse inreceived
charge on GST regime.
of goods or services
by him.

GST paid on Goods or Services under reverse charge mechanism is available as ITC to the registered dealer/person
provided that such Goods or Services are used or will be used for business or furtherance of business.

The ITC is available by recipient cannot be used towards payment of Output Tax on Goods or Services, the payment of
tax under reverse charge only on cash.

Fig. 6: Input Tax Credit under Reverse Charge Mechanism in GST regime.
Reverse Charge Mechanism (RCM) Provisions applicability under GST: INR 5,000 per
day Transaction Limit
According to Section 9(4) of CGST Act, 2016, in respect of the supply of taxable goods or of
services or both by a supplier, who is an unregistered dealer or person (URD/URP) to a
registered dealer or person and tax shall be paid on such goods or services or both by such
registered dealer or person as if he is the person liable for paying tax.
Applicability of such exemption shall not be applicable where the aggregate value of such
supplies of goods and services or both received by a registered person from any or all the
supplies, who is or are not registered, exceeds INR 5,000 per day.

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Composition Scheme [2]

Composition Scheme available under GST

Availability of Composition Conditions for availing the option
Scheme of composition scheme

Composition Scheme permit a registered taxable person, whose The taxable person should not affect any Inter-State supplies of
aggregate turnover in a financial year does not exceed INR 50 goods or of services or both
lacs, to pay tax at the rate not exceeding 1%, of the turnover.

Aggregate Turnover = Value of all (Taxable and Non-Taxable

Supplies + Exempt Supplies + Exports) – (Taxes + Value of Would be applicable for all transactions under the same PAN
Inward Supplies + Value of Supplies taxable under Reverse
Charge) of a person having the same PAN.

This scheme would be applicable only to taxable person whose Person opting to pay tax under the Composition Scheme is
supplies are restricted to a particular State. In other words, a prohibited from collecting tax.
person effecting Inter-State supplies cannot opt for this scheme.

The taxable person should make an application exercising his
option to pay tax under this scheme. Once granted, the eligibility
would be valid unless his permission is cancelled under law or
he becomes ineligible.
Taxable person opting to pay tax under the composition
scheme will not be eligible for any Input tax Credit.
There may be other conditions or restrictions which may be
prescribed under the Rules.

Fig. 7: Availability of composition scheme under GST.

Journal Entries under GST regime

Let, I consider a few basic accounting transactions with the help of an examples for more
clarification (all amounts excluding GST) for the manufacturer, traders and service providers.
Illustration 1 Journal entries in the books of Entity A, had the following transactions in July
2017.

Journal entries for Purchase transactions (Inward supplies of Goods or

Services)
Particulars Amount
(in INR)
1. Purchased a goods (GST @ 5%) from a registered dealer within the 4,00,000
State.
2. Purchased a goods (GST @ 12%) from a registered dealer within 20,000
the State (but dealer is not reflected in supplier).
3. Purchased a goods (GST @ 18%) from a registered dealer outside 1,00,000
the State
4. Purchased a goods (GST @ 12%) from an unregistered dealer 30000
within the State (day 1)
5. Purchased a goods (GST @ 5%) from an unregistered dealer 4,000
6. Purchased a goods (GST @ 12%) from a composition dealer 80,000
7. Received Legal consultation services (GST @ 18%), on which tax 10,000
payable on Reverse Charge and paid

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8. Paid Internet & Telephone bill (Service received within the State) 5000
9. Purchased a Refrigerator (GST @ 18%) for his office from M/S 50,000
Samsung Elect. Outside the State
Journal entries for Sales transactions (Outward supplies of Goods or
Services)
10. Sold a goods (GST @ 5%) to M/S ABC Ltd. Within the State 60,000
11. Sold a goods (GST @ 12%) to M/S Royal Pvt. Ltd. Outside the 1,50,000
State
12. Sold a goods (GST @ 5%) to Mr. John (Consumer) within the State 5,00,000
13. Sold a goods (GST @ 12%) to Mr. Roy (Consumer) 2,00,000
14. Export some goods (GST @ 12%), when GST Payble 1,00,000
15. Export some goods (GST @ 18%) to M/S Asia & Co. 1,50,000
16. Sold an exempted goods 50,000
Journal entries for Goods returns transactions
17. Received a goods (GST @ 5%) returns (B2B) 10,000
18. Received a goods (GST @ 12%) returns (B2C) 50,000
Journal entries for Amount received in Advance
19. Received some advance from outside the State in the month of July- 20,000
2017
20. Raising Tax Invoice in the month of Aug-2017 1,00,000

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Transaction Journal Entries Under Goods and Services Act, 2017 in India
Inward Supply – Purchases (in various cases) from Reporting GSTRT table
Registered Dealer - Local Purchase A/c 4,00,000 GSTR – 2
Intra-State 2.5% Input CGST A/c 10,000 Table – 3
2.5% Input SGST A/c 10,000
To Vendor (Registered dealer) 4,20,000
Registered Dealer - Local Purchase A/c 20,000 GSTR – 2
Intra-State (Not 6% Input CGST A/c 1,200 Table – 3
reflected in supplier i.e. 6% Input SGST A/c 1,200
GSTR 1 mismatch To Vendor (Registered dealer) 21,400
case)
Registered Dealer - Inter-State Purchase A/c 1,00,000 GSTR – 2
Inter-State 18% Input IGST A/c 18,000 Table – 3
To Vendor (Registered dealer) A/c 1,18,000
Purchase from Unregistered Dealer (URD) Purchase A/c 30,000 GSTR – 2
Unregistered Dealer To vendor (Unregistered) A/c 30,000 Table – 4 B
(Day 1)
Tax payable on Reverse 6% Input CGST URD A/c 1,800 GSTR – 2
charge from above 6% Input SGST URD A/c 1,800 Table – 4 B
URD purchase (Day 1) To 6% Output CGST URD (Liability) A/c 1,800
To 6% Output SGST URD (Liability) A/c 1,800
Purchase from Unregistered Dealer (URD) Purchase A/c 4,000 GSTR – 2
Unregistered dealer To Vendor (Unregistered) A/c 4,000 Table – 4 B
(Day – 2)
Purchase from Composition Purchase A/c 80,000 GSTR – 2
Composition Dealer To Creditors 80,000 Table – 7 A
Table – 7B

Legal service received Legal Exp. A/c 10,000 GSTR – 2

on which tax is payable To Service Provider (Registered) A/c 10,000 Table – 4 A
on reverse charge
Tax payable on reverse 9% Input CGST RCM A/c 900 GSTR – 2
Charge 9% Input SGST RCM A/c 900 Table – 4 A
To 9% Output CGST RCM (Liability) 900
To 9% Output SGST RCM (Liability) 900
Expenses & Purchase of Capital Goods3

Indirect Expenses Internet & Telephone Charges A/c 5,000 GSTR – 2

9% Input CGST A/c 450 Table – 3
9% Input SGST A/c 450
To Bank A/c 5,900
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Asset Purchase (Inter- Refrigerator A/c 50,000 GSTR – 2
State) 18% Input IGST A/c 9,000 Table – 3
To Bank 59,000
Outward Supply – Sales (in various cases) to
Local Sales - B2B ABC Ltd. A/c 63,000 GSTR – 1
To Local B2B Sales A/c 60,000 Table – 4 A
To 2.5% Output CGST A/c 1,500 e-commerce transaction can
To 2.5% Output SGST A/c 1,500 be adjustment entry
Inter-State Sales M/S Royal Pvt. Ltd. A/c 1,68,000 GSTR – 2
To Inter-State Sales A/c 1,50,000 Table – 4 A
To 12% Output IGST A/c 18,000
Local Sales – B2CL Mr. John A/c 5,25,000 GSTR – 1
To Local B2C Sales A/c 5,00,000 Table – 5
To 2.5% Output CGST 12,500 To report with State code
To 2.5% Output SGST 12,500
Local Sales – B2CS Mr. Roy A/c 2,24,000 GSTR – 1
To Local B2C Sales A/c 2,00,000 Table – 7 A
To 6% Output CGST A/c 12,000
To 6% Output SGST A/c 12,000
Export (When GST Debtors A/c 1,00,000 GSTR – 1
Payable) IGST Refund Due A/c 12,000 Table – 6 A
To Sales (Exports) 1,00,000 With payment of duty
To 12% Output IGST A/c 12,000
Export Debtors A/c 1,50,000 1,50,000 GSTR – 1
To Sales (Exports) A/c Table – 6 A
Under LUT/Bond
Exempted / NIL Sales Debtors A/c 50,000 GSTR – 1
To Sales (Exempted) 50,000 Table – 8
Goods Return (in various cases)3 from
Credit Note – B2B Local B2B Sales A/c 10,000 GSTR – 1
2.5% Output CGST A/c 250 Table – 9
2.5% Output SGST A/c 250 Adjustment to past sales
To M/S ABC Ltd. 10,500
Credit Note – B2C Local B2C Sales A/c 50,000 GSTR – 1
6% Output CGST A/c 3,000 Table – 10
6% Output SGST A/c 3,000 Adjustment to past sales
To Mr. Roy 56,000
Amount Received in Advance2
Advance Receipt (in Cash/Bank A/c 10,000 GSTR – 1
July – 2017) Inter-State IGST Advance A/c 1,800 Table – 11 A
To Customer 10,000
To 18% Output IGST (Advance0 1,800
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Raising Tax Invoice (in Customer A/c 1,77,000 GSTR – 1
Aug – 2017) To Inter-State Sales A/c 1,50,000 Table – 4 A
To 18% Output IGST A/c 27,000
GSTR - 1
Transfer to Liability 2.5% Output CGST A/c 1,500 GSTR – 1
Ledger 2.5% Output SGST A/c 1,500 Adjustment Entry to be auto
6% Output CGST A/c 12,000 populated in GSTR – 3
6% Output SGST A/c 12,000 Part – A,
12% Output IGST A/c 30,000 Table – 8
To Liability Ledger CGST A/c 13,500
To Liability Ledger SGST A/c 13,500
To Liability Ledger IGST A/c 30,000
(CGST = 1500+12000 = 13,500, SGST = 1,500+12,000 =
13,500 and IGST = 18,000+12,000 = 30,0000
Liability of Advance 18% Output IGST (Advance) A/c 1,800 GSTR – 1
Receipt To Liability Ledger IGST A/c 1,800 Adjustment Entry to be auto
populated in GSTR – 3
Table – 8
Liability under RCM on 6% Output CGST URD (Liability) A/c 1,800 GSTR – 1
URD 6% Output SGST URD (Liability) A/c 1,800 Adjustment Entry to be auto
To Liability Ledger CGST A/c 1,800 populated in GSTR – 3
To Liability Ledger SGST A/c 1,800 Table – 8
Liability Payable on 9% Output CGST RCM (Liability) A/c 900 GSTR – 1
RCM 9% Output SGST RCM (Liability) A/c 900 Adjustment Entry to be auto
To Liability Ledger CGST A/c 900 populated in GSTR – 3
To Liability Ledger SGST A/c 900 Table – 8
GSTR - 2
Transfer to Credit ITC CGST Ledger A/c 10,450 GSTR – 2
Ledger ITC SGST Ledger A/c 10,450 Adjustment entry
ITC IGST Ledger A/c 27,000
To 2.5% Input CGST A/c 10,000
To 2.5% Input SGST A/c 10,000
To 9% Input CGST A/c 450
To 9% Input SGST A/c 450
To 18% Input IGST A/c 27,000
(IGST = 18000+9000)
Credit on URD ITC CGST Ledger A/c 1,800 GSTR – 2
Purchase on which tax ITC SGST Ledger A/c 1,800 Adjustment entry
to be paid on Reverse To 6% Input CGST URD A/c 1,800
Charge To 6% Input SGST URD A/c 1,800
Transfer to credit on ITC CGST Ledger A/c 900 GSTR – 2
RCM Purchase ITC SGST Ledger A/c 900 Adjustment entry
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To 9% Input CGST RCM A/c 900
To 9% Input SGST RCM A/c 900
When ITC reflected in Provision ITC CGST A/c 1,200 GSTR – 2
GSTR – 2 Provision ITC SGST A/c 1,200 Adjustment entry
To 6% Input CGST A/c 1,200
To 6% Input SGST A/c 1,200
GSTR – 3
Transfer of Liability Liability Ledger CGST A/c 1,800 Adjustment entry
under RCM (URD) Liability Ledger SGST A/c 1,800
To Electronic Cash CGST Ledger A/c 1,800
To Electronic Cash SGST Ledger A/c 1,800
Transfer of Liability Liability Ledger CGST A/c 900 Adjustment entry
under RCM Liability Ledger SGST A/c 900
To Electronic Cash CGST Ledger A/c 900
To Electronic Cash SGST Ledger A/c 900
Transfer to Credit Liability Ledger CGST A/c 13,500 Adjustment entry
Ledger Liability Ledger SGST A/c 13,500
Liability Ledger IGST A/c 31,800
Electronic Credit CGST Ledger A/c 850
Electronic Credit SCGST Ledger A/c 850
To ITC CGST Ledger A/c 13,150
To ITC SGST Ledger A/c 13,150
To ITC IGST Ledger A/c 27,000
To Provisional ITC CGST A/c 1,200
To Provisional ITC SGST A/c 1,200
To Electronic Cash IGST Ledger A/c 4,800
On Payment of Tax2, 3
Transfer to Cash Electronic Cash CGST Ledger A/c 1,800 GSTR – 3
Ledger under RCM on Electronic Cash SGST Ledger A/c 1,800 Part – B
URD To Bank A/c 3,600 Table – 12
Transfer to Cash Electronic Cash CGST Ledger A/c 900 GSTR – 3
Ledger under RCM Electronic Cash SGST Ledger A/c 900 Part – B
To Bank A/c 1,800 Table – 12
Transfer to Cash Electronic Cash CGST Ledger A/c 4,800 GSTR – 3
Ledger To Electronic Credit CGST Ledger A/c 8,50 Part – B
To Electronic Credit SCGST Ledger A/c 8,50 Table – 12
To Bank A/c 3,100

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CONCLUSION

GST is a globally accepted tax system and therefore, through it, India can boost its economy
but what it needs is an efficient administration and excellent implementation of GST. To
achieve its goal 'one tax one market' cohesive tax approach is very important. An ambitious
indirect tax reforms from the previous taxation procedures to GST regime, it may simplify the
remittance procedure, is bound to destabilize the indirect tax accounting as well as financial
reporting aspects of a majority of businesses. In order to easily digitize and streamline any
entities records maintenance, accounting and taxation procedures, standardization of invoice
capturing process, for both sales and purchases and statutory compliance requisites. As an
impact of input tax credit GST is likely to bring significant benefits to organizations by way of
tax credit. It is a well-established accounting principle that refundable taxes are not considered
as part of cost of acquisition of asset/expense and are accounted as an asset. Transition to GST
will require companies to reconfigure their inventory valuation or asset capitalization or
expense recording rules in their accounting system to ensure tax credits are accounted
appropriately in the GST regime. In a GST regime, the new COA for financial reporting will
depend on the type of business, credit availment rules and place of supply etc.

REFERENCES

1. The Institute of Cost Accountants of India. An Insight of Goods & Services Tax (GST) in
India (Volume I). India, 2015.
2. Central Board of Excise and Customs. Central Goods and Services Tax (CGST) Rules,
(Notification vide Notification No. 03 dated 19th June 2017, 07 dated 27th June 2017, 10
dated 28th June 2017, 15 dated 1st July 2017, 17 dated 27th July 2017, 22 dated 17th August
2017 and 27 dated 30th August 2017). India, DC: New Delhi GOI the Gazette of India,
2017.
3. Central Board of Excise and Customs. Notification No. 10/2017 – Central Tax dated 28th
June 2017, 2017. India, DC: New Delhi GOI the Gazette of India, 2017.
4. Central Board of Excise and Customs. (2017). The Central Goods and Services Tax Act,
2017 (No. 12 of 2017) dated 12th April 2017, 2017. India, DC: New Delhi GOI the Gazette
of India, 2017.
5. C. P. Goyal, E-book (No. 1) on Transactional Provisions on Input Tax Credit. India, 2017.

Corresponding Author: Vartika Sahu

Research scholar, Department of Commerce University of Lucknow, India.

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