The goods and services tax regime in india an accounting perspective protected

Asian Research Journal of Business Management Issue 2 (Vol.5)2017 Issn: 2321-9246
DOI:10.24214/ARJBM/5/2/1230 Research Article
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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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Fig. 1: Key points that are significant from perspective of maintain of accounts and records [2,
3].
Following accounts and records will have to be
maintained by every registered person: (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
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.
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.

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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
maintained under previous tax regime
Accounts Taxpayer
Excise Payable
A/c
Manufacturer
Cenvat Credit
A/c
Manufacturer
VAT Payable
A/c
Trader/Manufacturer
VAT Input
Credit A/c
Trader/Manufacturer
CST A/c Trader/Manufacturer
(for inter-state
purchases and sales)
Service Tax
Payable A/c
Service Provider4
Service Tax
Credit A/c
Service Provider
/Manufacture but not
allowed to trader4
Ledger accounts to be maintained under GST regime
Accounts Remark
CGST Payable A/c Tax on Intra-State outward
supplies
CGST Input Credit A/c Input tax on Intra-State Inward
supplies
SGST Payable A/c Tax on Intra-State outward
supplies
SGST Input Credit A/c Input tax on Intra-State Inward
supplies
IGST Payable A/c Tax on Inter-State outward
supplies
IGST Input Credit A/c Tax on Inter-State Inward supplies
Electronic Cash Ledger
A/c
To be maintained on GST portal
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
outward supply of
goods and services
made within a tax
period including the
name and complete
address of buyer
must be maintain
 Percentage wise
Purchase (Inward
Supply)
All details of Inward
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.
 Rate wise
Production All the details of
Goods
Manufactured or
Produced in a
factory or
production house by
the Taxpayer
Every
assessee
carrying
out
manufac
turing
activity
Customer / Vendors
Accounts (Multiple
GSTIN)
All the details of
vendors.
 Name
 Address
 State
 GSTN
 PAN
Stock of Goods
Received and
Supplied.
This accounts
register should
contain opening
balance, receipt,
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
 Item Name
 HSN Code/SAC Code
 Tax Rate
 Unit of Measurement
Transaction Time Select the followings:
 Revenue Ledger
 Party Ledger
 Item

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

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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
Input CGST A/c
Input SGST A/c
Input IGST A/c
Input CGST RCM A/c
Input SGST RCM A/c
Input IGST RCM A/c
Input CGST URD A/c
Input CGST URD A/c
Input CGST URD A/c
Input CGST Ledger A/c
Input SGST Ledger A/c
Input IGST Ledger A/c
Provisional ITC CGST A/c
Provisional ITC SGST A/c
Provisional ITC IGST A/c
Electronic Cash CGST Ledger A/c
Electronic Cash SGST Ledger A/c
Electronic Cash IGST Ledger A/c
Cash/ Bank A/c
Current Liabilities
9% Output CGST A/c
9% Output SGST A/c
18% Output IGST A/c
9% Output CGST (Advance) A/c
9% Output SGST (Advance) A/c
18% Output IGST (Advance) A/c
CGST Advance A/c
SGST Advance A/c
9% Output CGST URD A/c (Liability)
9% Output SGST URD A/c (Liability)
18% Output IGST URD A/c (Liability)
9% Output CGST RCM A/c (Liability)
9% Output SGST RCM A/c (Liability)
18% Output IGST RCM A/c (Liability)
IGST Advance A/c
*Note: Here only 18% GST rate is consider.
Similar entries apply for other rate of taxes.
Sales A/c
Local B2B Sales A/c
Local B2C Sales A/c
Interstate B2B Sales
Interstate B2C Sales
Current Liabilities
Liability Ledger CGST A/c
Liability Ledger SGST A/c
Liability Ledger IGST A/c
Direct Expenses A/c
Direct Expenses Registered A/c
Direct Expenses Unregistered A/c
Indirect Expenses A/c
Indirect Expenses Registered A/c
Indirect Expenses Unregistered A/c

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

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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)
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
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.

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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
Fig. 6: Input Tax Credit under Reverse Charge Mechanism in GST regime.
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.
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.
The recipient can avail Input Tax Credit of GST amount that is paid under reverse charge on received 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.

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Composition Scheme [2]
Composition Scheme available under GST
Availability of Composition
Scheme
Conditions for availing the option
of composition scheme
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
State.
4,00,000
2. Purchased a goods (GST @ 12%) from a registered dealer within
the State (but dealer is not reflected in supplier).
20,000
3. Purchased a goods (GST @ 18%) from a registered dealer outside
the State
1,00,000
4. Purchased a goods (GST @ 12%) from an unregistered dealer
within the State (day 1)
30000
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
payable on Reverse Charge and paid
10,000
Composition Scheme permit a registered taxable person, whose
aggregate turnover in a financial year does not exceed INR 50
lacs, to pay tax at the rate not exceeding 1%, of the turnover.
The taxable person should not affect any Inter-State supplies of
goods or of services or both
This scheme would be applicable only to taxable person whose
supplies are restricted to a particular State. In other words, a
person effecting Inter-State supplies cannot opt for this scheme.
Aggregate Turnover = Value of all (Taxable and Non-Taxable
Supplies + Exempt Supplies + Exports) – (Taxes + Value of
Inward Supplies + Value of Supplies taxable under Reverse
Charge) of a person having the same PAN.
Would be applicable for all transactions under the same PAN
Person opting to pay tax under the Composition Scheme is
prohibited from collecting tax.
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.

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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
Samsung Elect. Outside the State
50,000
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
State
1,50,000
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-
2017
20,000
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 -
Intra-State
Local Purchase A/c
2.5% Input CGST A/c
2.5% Input SGST A/c
To Vendor (Registered dealer)
4,00,000
10,000
10,000
4,20,000
GSTR – 2
Table – 3
Registered Dealer -
Intra-State (Not
reflected in supplier i.e.
GSTR 1 mismatch
case)
Local Purchase A/c
6% Input CGST A/c
6% Input SGST A/c
To Vendor (Registered dealer)
20,000
1,200
1,200
21,400
GSTR – 2
Table – 3
Registered Dealer -
Inter-State
Inter-State Purchase A/c
18% Input IGST A/c
To Vendor (Registered dealer) A/c
1,00,000
18,000
1,18,000
GSTR – 2
Table – 3
Purchase from
Unregistered Dealer
(Day 1)
Unregistered Dealer (URD) Purchase A/c
To vendor (Unregistered) A/c
30,000
30,000
GSTR – 2
Table – 4 B
Tax payable on Reverse
charge from above
URD purchase (Day 1)
6% Input CGST URD A/c
6% Input SGST URD A/c
To 6% Output CGST URD (Liability) A/c
To 6% Output SGST URD (Liability) A/c
1,800
1,800
1,800
1,800
GSTR – 2
Table – 4 B
Purchase from
Unregistered dealer
(Day – 2)
Unregistered Dealer (URD) Purchase A/c
To Vendor (Unregistered) A/c
4,000
4,000
GSTR – 2
Table – 4 B
Purchase from
Composition Dealer
Composition Purchase A/c
To Creditors
80,000
80,000
GSTR – 2
Table – 7 A
Table – 7B
Legal service received
on which tax is payable
on reverse charge
Legal Exp. A/c
To Service Provider (Registered) A/c
10,000
10,000
GSTR – 2
Table – 4 A
Tax payable on reverse
Charge
9% Input CGST RCM A/c
9% Input SGST RCM A/c
To 9% Output CGST RCM (Liability)
To 9% Output SGST RCM (Liability)
900
900
900
900
GSTR – 2
Table – 4 A
Expenses & Purchase of Capital Goods3
Indirect Expenses Internet & Telephone Charges A/c
9% Input CGST A/c
9% Input SGST A/c
To Bank A/c
5,000
450
450
5,900
GSTR – 2
Table – 3

27
Asset Purchase (Inter-
State)
Refrigerator A/c
18% Input IGST A/c
To Bank
50,000
9,000
59,000
GSTR – 2
Table – 3
Outward Supply – Sales (in various cases) to
Local Sales - B2B ABC Ltd. A/c
To Local B2B Sales A/c
To 2.5% Output CGST A/c
To 2.5% Output SGST A/c
63,000
60,000
1,500
1,500
GSTR – 1
Table – 4 A
e-commerce transaction can
be adjustment entry
Inter-State Sales M/S Royal Pvt. Ltd. A/c
To Inter-State Sales A/c
To 12% Output IGST A/c
1,68,000
1,50,000
18,000
GSTR – 2
Table – 4 A
Local Sales – B2CL Mr. John A/c
To Local B2C Sales A/c
To 2.5% Output CGST
To 2.5% Output SGST
5,25,000
5,00,000
12,500
12,500
GSTR – 1
Table – 5
To report with State code
Local Sales – B2CS Mr. Roy A/c
To Local B2C Sales A/c
To 6% Output CGST A/c
To 6% Output SGST A/c
2,24,000
2,00,000
12,000
12,000
GSTR – 1
Table – 7 A
Export (When GST
Payable)
Debtors A/c
IGST Refund Due A/c
To Sales (Exports)
1,00,000
12,000
1,00,000
12,000
GSTR – 1
Table – 6 A
With payment of duty
Export Debtors A/c
To Sales (Exports) A/c
1,50,000 1,50,000 GSTR – 1
Table – 6 A
Under LUT/Bond
Exempted / NIL Sales Debtors A/c
To Sales (Exempted)
50,000
50,000
GSTR – 1
Table – 8
Goods Return (in various cases)3
from
Credit Note – B2B Local B2B Sales A/c
2.5% Output CGST A/c
2.5% Output SGST A/c
To M/S ABC Ltd.
10,000
250
250
10,500
GSTR – 1
Table – 9
Adjustment to past sales
Credit Note – B2C Local B2C Sales A/c
6% Output CGST A/c
6% Output SGST A/c
To Mr. Roy
50,000
3,000
3,000
56,000
GSTR – 1
Table – 10
Adjustment to past sales
Amount Received in Advance2
Advance Receipt (in
July – 2017) Inter-State
Cash/Bank A/c
IGST Advance A/c
To Customer
To 18% Output IGST (Advance0
10,000
1,800
10,000
1,800
GSTR – 1
Table – 11 A

28
Raising Tax Invoice (in
Aug – 2017)
Customer A/c
To Inter-State Sales A/c
1,77,000
1,50,000
27,000
GSTR – 1
Table – 4 A
GSTR - 1
Transfer to Liability
Ledger
2.5% Output CGST A/c
2.5% Output SGST A/c
6% Output CGST A/c
6% Output SGST A/c
12% Output IGST A/c
To Liability Ledger CGST A/c
To Liability Ledger SGST A/c
To Liability Ledger IGST A/c
(CGST = 1500+12000 = 13,500, SGST = 1,500+12,000 =
13,500 and IGST = 18,000+12,000 = 30,0000
1,500
1,500
12,000
12,000
30,000
13,500
13,500
30,000
GSTR – 1
Adjustment Entry to be auto
populated in GSTR – 3
Part – A,
Table – 8
Liability of Advance
Receipt
18% Output IGST (Advance) A/c
To Liability Ledger IGST A/c
1,800
1,800
GSTR – 1
Table – 8
Liability under RCM on
URD
6% Output CGST URD (Liability) A/c
6% Output SGST URD (Liability) A/c
1,800
1,800
1,800
1,800
GSTR – 1
Table – 8
Liability Payable on
RCM
9% Output CGST RCM (Liability) A/c
9% Output SGST RCM (Liability) A/c
900
900
900
900
GSTR – 1
Table – 8
GSTR - 2
Transfer to Credit
Ledger
ITC CGST Ledger A/c
ITC SGST Ledger A/c
ITC IGST Ledger A/c
To 2.5% Input CGST A/c
To 2.5% Input SGST A/c
To 9% Input CGST A/c
To 9% Input SGST A/c
To 18% Input IGST A/c
(IGST = 18000+9000)
10,450
10,450
27,000
10,000
10,000
450
450
27,000
GSTR – 2
Adjustment entry
Credit on URD
Purchase on which tax
to be paid on Reverse
Charge
ITC CGST Ledger A/c
ITC SGST Ledger A/c
To 6% Input CGST URD A/c
To 6% Input SGST URD A/c
1,800
1,800
1,800
1,800
GSTR – 2
Adjustment entry
Transfer to credit on
RCM Purchase
ITC CGST Ledger A/c
ITC SGST Ledger A/c
900
900
GSTR – 2
Adjustment entry

29
To 9% Input CGST RCM A/c
To 9% Input SGST RCM A/c
900
900
When ITC reflected in
GSTR – 2
Provision ITC CGST A/c
Provision ITC SGST A/c
To 6% Input CGST A/c
To 6% Input SGST A/c
1,200
1,200
1,200
1,200
GSTR – 2
Adjustment entry
GSTR – 3
Transfer of Liability
under RCM (URD)
To Electronic Cash CGST Ledger A/c
To Electronic Cash SGST Ledger A/c
1,800
1,800
1,800
1,800
Adjustment entry
Transfer of Liability
under RCM
To Electronic Cash CGST Ledger A/c
To Electronic Cash SGST Ledger A/c
900
900
900
900
Adjustment entry
Transfer to Credit
Ledger
Liability Ledger IGST A/c
Electronic Credit CGST Ledger A/c
Electronic Credit SCGST Ledger A/c
To ITC CGST Ledger A/c
To ITC SGST Ledger A/c
To ITC IGST Ledger A/c
To Provisional ITC CGST A/c
To Provisional ITC SGST A/c
To Electronic Cash IGST Ledger A/c
13,500
13,500
31,800
850
850
13,150
13,150
27,000
1,200
1,200
4,800
Adjustment entry
On Payment of Tax2, 3
Transfer to Cash
Ledger under RCM on
URD
To Bank A/c
1,800
1,800
3,600
GSTR – 3
Part – B
Table – 12
Transfer to Cash
Ledger under RCM
To Bank A/c
900
900
1,800
GSTR – 3
Part – B
Table – 12
Transfer to Cash
Ledger
To Electronic Credit CGST Ledger A/c
To Electronic Credit SCGST Ledger A/c
To Bank A/c
4,800
8,50
8,50
3,100
GSTR – 3
Part – B
Table – 12

30
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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