Unit 4: GOODS & SERVICE TAX (GST)

GOODS & SERVICE TAX (GST):

What is GST?

GST is an acronym for Goods and Services Tax. The main advantage of GST is a single
taxation system. Currently every state has different VAT and CST acts and rules and
people are often confused about the taxation system. Therefore, when GST will come, it will
remove all the confusion about different kinds of taxes, because there will be one and only
GST.

There are currently three types of GST:

1. CGST – Central GST – Applies to sales within the state – goes to Central
Government
2. SGST – State GST – Applies to sales within the state – goes to State Government
3. IGST – Integrated GST – Applies to sales outside the state – goes to Central
Government.

For example, if you sell something within the state, 50% of the GST will be
CGST and 50% of the GST will be SGST. But when you sell something outside a
state, 100% of it will be IGST which will go to the Central Government.

Before you can understand accounting of GST in Tally, you need to understand the
calculation of GST in Tally.
How to Activate GST in Tally

In Tally, to use GST features, it is mandatory to activate or enable GST. In Tally ERP 9, after
activation of GST in features, all the features which are GST related are available for all
general ledgers, stock items, and transactions.

To activate GST in Tally, refer the following steps:

Step 1: Click on F11: Features or press function key F11 under Gateway of Tally.
Step 3: Enter the following details on the next screen, "Company Operation Alteration".

Enable goods and service tax: Specify 'Yes'.

Set/alter GST details: Specify 'Yes'.

Step 4: The following screen will appear when we enable 'Yes' for Set/alter GST details.
 PRACTICE EXERCISES

QUESTION NO. 16:

Rohan sells Google Pixel to Amit for 57,000 in Gujarat. Rohan has to collect GST
of 18%.
Calculation of GST in Tally:

Rohan has to collect GST and say it is 18%. Then GST will come at 10,260. As you have
read above, if you sell within the state there are two types of GST which will be attracted.
They are CGST and SGST. In this example, it would be half each. That means 9% CGST
and 9% SGST. It will be 5,130 CGST and 5,130 SGST.

Accounting of GST in Tally:

In the above example, Rohan sold Google Pixel to Amit for 57,000. The accounting entry
for the Rohan in his books will be as under. Rohan is the seller here. Now with GST
of 10,260 at the rate of 18% the entry will be as follows:

Cash A/c Dr 67,260

To Sales A/c 57,000
To CGST A/c 5,130
To SGST A/c 5,130

The above was a simple calculation of GST.

The ledger of CGST and SGST can be created under Duties and Taxes same as we create
ledgers for all the current taxes.

Here is how you can create the GST-Goods and Services ledgers in Tally.

 From Gateway of Tally, go to Accounts Info.

 Then select Ledgers.
 Now select Create under Single Ledger.
 Now Type CGST and select Duties and Ledgers from List of Groups.
 In Type of Duties/Taxes, select others.
 Select 9% in Percentage of Calculation.
 Select Method of Calculation On Total Sales.
 Select Normal Rounding in the Rounding Method.
 And, lastly select the Rounding Limit to 0.

Here is what it looks like when I am creating CGST ledger in Tally.

 CGST Ledger in Tally

Now, repeat the same process for SGST ledger as well as IGST ledger and for IGST
ledger set the percentage to 18%.

This is how the IGST ledger will look like in Tally.

IGST ledger in Tally

CGST and SGST entry in Tally:

From the above picture you can easily see that we have sold Google Pixel to Amit
for 57,000 and GST of 10,260 which is divided in two different parts namely CGST and
SGST.

Now if we assume we sold the Google Pixel to Amit who is from a different state which is
Uttar Pradesh, the accounting entry in Tally for the same will be almost similar to above.

The only change it will have is of IGST – Integrated Goods and Services Tax because of
interstate transaction.

Let me show you how that will appear in Tally if you try to pass the sales entry.
QUESTION NO. 17:

Saina purchased stationeries from ABC stationeries by cash. The following are the items of
purchase.

Items Quantity Rate GST %

Erasers 100 10 9
Pens 50 45 9
Writing Pads 15 150 9
Rulers 35 15 9
Pencils 150 25 9
Writing Desk 5 450 9

Record the above transaction and calculate GST.

QUESTION NO. 18:

Reema purchased the following items from Shubham Electronics by cheque:

Items Quantity Rate GST %

Washing Machine 2 19000 6
Television 5 25000 6
Computer 8 15000 6
Mobile 10 36250 6
Iron Box 25 2250 6

Record the above transaction and calculate GST.