GST Accounting in India: Complete Guide to Goods and Services Tax

The Great GST Confusion

Prakash owned a textile shop in Surat. Before July 2017, he dealt with:

• VAT (4% to 14.5%)
• Central Excise (12.5%)
• Service Tax (15%)
• Entry Tax
• Octroi
• Multiple returns and compliance

Then GST arrived. One Tax, One Nation. But one massive confusion.

His CA handed him a bill for “GST compliance services.”

“₹50,000? For what?”

“GSTR-1, GSTR-3B, GSTR-9, GSTR-2A reconciliation, input tax credit claims, e-way bills…”

Prakash realized: GST simplified taxation. But accounting? That got complicated.

What is GST?

Definition

Goods and Services Tax (GST) is a comprehensive indirect tax levied on the supply of goods and services in India, replacing multiple cascading taxes.

Key Date

1st July 2017 - GST rollout

Structure of GST

Example

Intra-State Sale (Delhi to Delhi):

• Sale: ₹10,000
• GST @ 18%: ₹1,800
  • CGST @ 9%: ₹900
  • SGST/UTGST @ 9%: ₹900

Inter-State Sale (Delhi to Mumbai):

• Sale: ₹10,000
• IGST @ 18%: ₹1,800

GST Rate Structure

Current GST Slabs

Composition Scheme

GST Registration

Mandatory Registration

GSTIN Structure

Format: 22AAAAA0000A1Z5

Key GST Concepts for Accounting

Place of Supply

Time of Supply

Goods: Earlier of

• Invoice date
• Receipt of payment
• Removal of goods

Services: Earlier of

• Invoice date (if issued within 30 days)
• Date of completion of service
• Receipt of payment

Value of Supply

Transaction Value
+ Other levies (excluding GST)
+ Incidental expenses charged
+ Interest, late fees
+ Subsidies (except government subsidies)
= Value for GST

GST Accounting Entries

Basic Ledger Accounts

Purchase Entry (Intra-State)

Purchased goods worth ₹50,000 + 18% GST from local supplier

Purchases A/c                  Dr.    50,000
Input CGST A/c                Dr.     4,500
Input SGST A/c                Dr.     4,500
    To Supplier A/c                        59,000
(Being goods purchased locally with GST)

Purchase Entry (Inter-State)

Purchased goods worth ₹50,000 + 18% IGST from out-of-state supplier

Purchases A/c                  Dr.    50,000
Input IGST A/c                Dr.     9,000
    To Supplier A/c                        59,000
(Being goods purchased interstate with IGST)

Sales Entry (Intra-State)

Sold goods worth ₹80,000 + 18% GST locally

Customer A/c                   Dr.    94,400
    To Sales A/c                           80,000
    To Output CGST A/c                      7,200
    To Output SGST A/c                      7,200
(Being goods sold locally with GST)

Sales Entry (Inter-State)

Sold goods worth ₹80,000 + 18% IGST to another state

Customer A/c                   Dr.    94,400
    To Sales A/c                           80,000
    To Output IGST A/c                     14,400
(Being goods sold interstate with IGST)

Input Tax Credit (ITC)

What is ITC?

The GST paid on business purchases can be claimed as credit against GST payable on sales.

Conditions for ITC

ITC Not Allowed On

ITC Reversal Required When

ITC Set-off Order

From July 2019, input tax credit set-off follows this priority:

Note: CGST cannot be set off against SGST and vice versa.

Monthly GST Calculation

Example: ABC Traders (Maharashtra)

Output GST (Sales):

Input GST (Purchases):

ITC Available:

• CGST: ₹27,000
• SGST: ₹27,000
• IGST: ₹18,000

Set-off Calculation:

IGST Liability: ₹54,000
Less: IGST ITC: ₹18,000
Balance IGST: ₹36,000
Less: CGST ITC (₹27,000 - ₹9,000 for CGST liability): ₹18,000
Net IGST Payable: ₹18,000

CGST Liability: ₹45,000
Less: Remaining CGST ITC (₹27,000 - ₹18,000): ₹9,000
Net CGST Payable: ₹36,000

SGST Liability: ₹45,000
Less: SGST ITC: ₹27,000
Net SGST Payable: ₹18,000

Total GST Payable: ₹18,000 + ₹36,000 + ₹18,000 = ₹72,000

GST Payment Entry

Payment of GST

Output CGST A/c               Dr.    45,000
Output SGST A/c               Dr.    45,000
Output IGST A/c               Dr.    54,000
    To Input CGST A/c                      27,000
    To Input SGST A/c                      27,000
    To Input IGST A/c                      18,000
    To Electronic Cash Ledger A/c          72,000
(Being monthly GST liability settled)

Deposit to Electronic Cash Ledger

Electronic Cash Ledger A/c    Dr.    72,000
    To Bank A/c                            72,000
(Being GST payment deposited)

GST Returns

Return Calendar

GSTR-3B Structure

Late Fees

GSTR-2A vs GSTR-2B Reconciliation

Why Reconcile?

Your ITC claim (GSTR-3B) should match what suppliers reported (GSTR-1 → GSTR-2A/2B).

Common Differences

Reconciliation Entry

ITC available but not in GSTR-2A (claimed anyway):

ITC Receivable (Suspense) A/c  Dr.    10,000
    To Input CGST A/c                       5,000
    To Input SGST A/c                       5,000
(Being ITC claimed but pending in GSTR-2A)

When it appears in GSTR-2A:

Input CGST A/c                Dr.     5,000
Input SGST A/c                Dr.     5,000
    To ITC Receivable (Suspense) A/c       10,000
(Being ITC now reflected in GSTR-2A)

E-Way Bill

When Required

Validity

Part A vs Part B

Special Scenarios

Reverse Charge Mechanism (RCM)

When buyer pays GST instead of seller.

Applicable on:

• Purchases from unregistered dealers
• Specified services (legal, GTA, sponsorship)
• Import of services

Entry for RCM:

Purchases A/c                  Dr.    10,000
Input CGST A/c (RCM)          Dr.       900
Input SGST A/c (RCM)          Dr.       900
    To Supplier A/c                       10,000
    To Output CGST A/c (RCM)                 900
    To Output SGST A/c (RCM)                 900
(Being purchase under RCM - GST paid by buyer)

Note: RCM ITC can be claimed in the same month.

Credit Note

Issuing credit note for ₹5,000 + GST:

Sales Return A/c               Dr.     5,000
Output CGST A/c               Dr.       450
Output SGST A/c               Dr.       450
    To Customer A/c                        5,900
(Being credit note issued for sales return)

Debit Note

Issuing debit note for price increase ₹2,000 + GST:

Customer A/c                   Dr.     2,360
    To Additional Sales A/c                2,000
    To Output CGST A/c                       180
    To Output SGST A/c                       180
(Being debit note for price revision)

GST in Financial Statements

Balance Sheet Presentation

Assets:

• Input CGST Receivable
• Input SGST Receivable
• Input IGST Receivable
• Electronic Cash Ledger Balance

Liabilities:

• Output CGST Payable
• Output SGST Payable
• Output IGST Payable

Disclosure Requirements

Common GST Accounting Mistakes

Mistake 1: Wrong Tax Type

Error: Charged IGST on local sale Impact: ITC mismatch, penalties Solution: Always verify place of supply

Mistake 2: ITC on Non-eligible Items

Error: Claimed ITC on car purchase Impact: ITC reversal + interest Solution: Check eligibility before claiming

Mistake 3: Timing Mismatch

Error: Claimed ITC before invoice appears in GSTR-2B Impact: ITC reversal Solution: Reconcile before filing

Mistake 4: Missing RCM

Error: Didn’t account for reverse charge Impact: Interest + penalties Solution: Identify all RCM transactions

GST Compliance Checklist

Monthly Tasks

• Reconcile sales with GSTR-1
• Verify ITC with GSTR-2B
• File GSTR-1 by 11th
• Pay GST and file GSTR-3B by 20th
• Generate e-way bills for dispatches
• Follow up on missing supplier invoices

Quarterly Tasks (QRMP Scheme)

• File GSTR-1 quarterly (if opted)
• Use IFF for B2B invoices monthly
• Pay GST monthly using challan

Annual Tasks

• File GSTR-9 annual return
• Get GST audit done (if applicable)
• Reconcile with books and returns
• Review ITC reversals required

Tools for GST Accounting

Popular Software

Government Portals

Disclaimer

This guide is for educational purposes. GST laws are complex and frequently updated. Actual accounting treatment may vary based on specific circumstances. Always consult a qualified GST practitioner or Chartered Accountant for compliance matters.

Summary

GST accounting requires understanding:

1. Tax Types: CGST, SGST, IGST based on place of supply
2. Input Tax Credit: Claim GST on purchases against sales
3. Returns: GSTR-1 (sales), GSTR-3B (summary), GSTR-9 (annual)
4. Reconciliation: Match your claims with GSTR-2A/2B
5. Compliance: E-way bills, timely filing, RCM

Master GST accounting = Better cash flow + No penalties + Peace of mind.

Social Media Posts

LinkedIn: “Before GST: VAT + Excise + Service Tax + Entry Tax + Octroi = 17+ taxes After GST: One tax, one return (well, almost!)

Key GST accounting concepts: • CGST + SGST = Intra-state • IGST = Inter-state • ITC = Your money back • GSTR-3B = Monthly summary • GSTR-2B reconciliation = Critical

Simplified taxation, complex compliance. That’s GST in India. #GST #IndianTaxation”

Twitter/X: “GST Accounting 101:

1️⃣ Charged IGST = Wrong state? Penalty 2️⃣ Missing ITC = Your money lost 3️⃣ Late GSTR-3B = ₹50/day late fee 4️⃣ No reconciliation = ITC reversal

Pro tip: Match GSTR-2B before filing every month

#GST #Accounting”

Instagram: “GST Made Simple 📊

Before: 17+ taxes, multiple returns, cascading effect After: 4 types (CGST, SGST, IGST, UTGST)

The basics: ✅ Buy something → Pay GST (Input) ✅ Sell something → Collect GST (Output) ✅ Output - Input = GST Payable ✅ File GSTR-1 & 3B monthly

Common mistakes: ❌ Wrong tax type (IGST vs SGST) ❌ Claiming blocked ITC ❌ Missing GSTR-2B reconciliation

One nation, one tax, one headache! 😅

#GSTIndia #AccountingTips”