1. Central GST (CGST)
2. State GST (SGST) or Union Territory
For the discussion, SGST and UTGST are referred to as SGST.
3. Integrated GST (IGST)
GST is of three types, i.e., Central GST (CGST), State GST (SGST), and Integrated GST (IGST). Now, we need to know which type of GST will be levied on the supply of goods and/or services.
1. CGST and SGST are levied on intra-state (within the state) supply of Goods and/or Services: Whether a supply (sale) of goods and/or services is intra-state will depend on the place from where the supply is made and the place to which supply is made.
For example, if both seller and purchaser of goods and/or services are located within the same State (say West Bengal), both CGST and SGST will be levied.
2. IGST is levied on inter-state supply (sale) of Goods and/or Services: Whether a supply (sale) is inter-state will also depend on the place from where the supply is made and the place to which supply is made.
For example, if the seller is located in Delhi and the purchaser is located in Kolkata, IGST will be levied.
The GST Accounts maintained are:
1. Input CGST: Input CGST is the CGST Paid on intra-state purchase (supply) of Goods and/or Services and it can be set off against GST Collected, i.e., Output CGST and Output IGST in that order. Besides the above, taxpayers may pay CGST in Government Account.
2. Input SGST: Input SGST is the SGST Paid on intra-state purchase (supply) of Goods and/or Services and it can be set off against GST Collected, i.e., Output SGST and Output IGST in that order. Besides the above, taxpayers may pay SGST in Government Account.
On intrastate supply of goods and/or services, both CGST and SGST are levied at 50% of the specified rate. For example, if the specified rate is 18%, both CGST and SGST will be levied at 9% each.
3. Input IGST: Input IGST is the IGST Paid on inter-state purchase (supply) of Goods and/or Services, and it is allowed to be set off against GST Collected, i.e., Output IGST, Output CGST, and Output SGST in that order. IGST is also levied on goods and/or services imported from outside the country. Besides the above, taxpayers may pay IGST in Government Account.
4. Output CGST: Output CGST is the CGST Collected on an intra-state sale (supply) of Goods and/or Services along with SGST.
5. Output SGST: Output SGST is the SGST Collected on an intra-state sale (supply) of Goods and/or Services along with CGST.
6. Output IGST: Output IGST is the IGST Collected on inter-state sale (supply) of Goods and/or Services. In the case of an inter-state sale, only IGST is levied.
(a) GST Paid (Input GST): GST Paid on the purchase of goods and/or services is an asset, except where it is not allowed to be set off and is accordingly debited to Input GST, i.e, Input CGST Account, Input SGST Account or Input IGST Account.
(b) GST Collected (Output GST): GST Collected on the sale of goods and/or services is a liability and is accordingly credited to Output GST, i.e., Output CGST Account, Output SGST Account, or Output IGST Account.
Input GST (Paid) is set off against Output GST (Collected) but in the prescribed order.
It is explained below with the help of a diagram:
When is GST Paid on Supply (Purchase) an Asset?
When is GST Paid on Supply (Purchase) a Cost?
Examples of entries passed for accounting of GST Paid or Collected are given below:
(i) Purchase of Fixed Assets
Fixed Asset A/c (Say Machinery) | ...Dr. |
Input CGST A/c | ...Dr. |
Input SGST A/c | ...Dr. |
Input IGST A/c | ...Dr. |
To Vendors' A/c |
(Being the machinery purchased and Input CGST, Input SGST and Input IGST claimed)
(ii) Journal Entry for Purchase of Goods
Purchases A/c | ...Dr. |
Input CGST A/c | ...Dr. |
Input SGST A/c | ...Dr. |
Input IGST A/c | ...Dr. |
To Creditors' A/c | |
(Being the purchases made) |
(iii) Journal Entry for Sale of Goods
Debtors' A/c | ...Dr. |
To Sales A/c | |
To Output CGST A/c | |
To Output SGST A/c | |
To Output IGST A/c | |
(Being the sales made) |
(iv) Journal Entry for Purchases Return
Creditors' A/c | ...Dr. |
To Purchases Returns A/c | |
To Input CGST A/c | |
To Input SGST A/c | |
To Input IGST A/c | |
(Being the purchases returns) |
In the case of Purchases Return, Input GST (CGST, SGST, or IGST) Account is credited because at the time of purchase of goods and/or services, Input GST (CGST, SGST, or IGST) Account was debited.
(v) Journal Entry for Sales Return
Sales Returns A/c | ...Dr. |
Output CGST A/c | ...Dr. |
Output SGST A/c | ...Dr. |
Output IGST A/c | ...Dr. |
To Debtors' A/c | |
(Being the sales returns) |
In the case of Sales Return, Output GST (CGST, SGST, or IGST) Account is debited because, at the time of sale of goods and/or services, Output GST (CGST, SGST, or IGST) Account was credited.
(vi) Journal Entry for Expenses
Printing & Stationery Expenses A/c | ...Dr. |
Telephone Expenses A/c | ...Dr. |
Input CGST A/c | ...Dr. |
Input SGST A/c | ...Dr. |
To Cash/Bank A/c | |
(Being the stationery purchased and telephone bill Paid, Input CGST and Input SGST claimed) |
(vii) Journal Entry for Drawings of Goods by Partner, Goods Given as Free Samples, Goods Destroyed, Goods Stolen, etc.
Partner's Capital/Current A/c | ...Dr. |
Advertisement A/c | ...Dr. |
Loss by Fire A/c | ...Dr. |
Loss by Theft A/c | ...Dr. |
To Purchases A/c | |
To Input CGST A/c | |
To Input SGST A/c | |
To Input IGST A/c | |
(Being the goods taken by the partner for personal use, hence Input CGST, Input SGST and Input IGST reversed) |
(viii) Setting off Input CGST against Output CGST
Output CGST A/c | ...Dr. |
To Input CGST A/c | |
(Being the Input CGST set off against Output CGST) |
As a result of this entry, either Input CGST or Output CGST Account will become nil.
(ix) Setting off Input CGST against Output IGST
Output IGST A/c | ..Dr. |
To Input CGST A/c | |
(Being the Input CGST set off against Output IGST) |
(x) Setting off Input SGST against Output SGST
Output SGST A/c | ...Dr |
To Input SGST A/c | |
(Being the Input SGST set off against Output SGST) |
As a result of this entry, either Input SGST or Output SGST Account will become nil.
(xi) Setting off Input SGST against Output IGST
Output IGST A/c | ...Dr. |
To Input SGST A/c | |
(Being the Input SGST set off against Output IGST) |
(xii) Setting off Input IGST against Output IGST
Output IGST A/c | ...Dr. |
To Input IGST A/c | |
(Being the Input IGST set off against Output IGST) |
(xiii) Setting off Debit Balance in Input CGST or SGST against Credit Balance in
Output IGST | ...Dr. |
Output IGST A/c | ...Dr. |
To Input CGST A/c | |
To Input SGST A/c | |
(Being the Output IGST set off to Input CGST and Input SGST) |
(xiv) Payment of GST
Input CGST A/c | ...Dr. |
Input SGST A/c | ...Dr. |
Input IGST A/c | ...Dr. |
To Bank A/c | |
(Being the GST deposited) |
1. What is GST? |
2. How does GST benefit the Indian economy? |
3. Who is liable to pay GST? |
4. What is the GST rate in India? |
5. Can GST be claimed as input tax credit? |
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