Goods and Services Tax (GST) is an indirect tax levied on the supply of goods and services. In accounting, GST transactions must be properly recorded to ensure compliance and accurate financial reporting. When a business makes a sale, output GST collected is credited to the GST Payable account, while the net revenue is recorded in the Sales account. When a business purchases goods or services, input GST paid is debited to the GST Input account, which can be claimed as input tax credit against output GST. Proper classification, recording, and reconciliation of GST ensure compliance with statutory requirements, prevent errors in tax liability, and maintain transparency in financial statements.
GST Transactions Accounting Entries:
| Transaction Type | Example Transaction | Debit Account | Credit Account |
|---|---|---|---|
| Purchase of Goods (GST Paid) | Purchased goods ₹50,000 + GST 18% | Purchases A/C ₹50,000
GST Input A/C ₹9,000 |
Cash/Bank A/C ₹59,000 |
| Sale of Goods (GST Collected) | Sold goods ₹60,000 + GST 18% | Accounts Receivable/Cash A/C ₹70,800 | Sales A/C ₹60,000
GST Output A/C ₹10,800 |
| Payment of GST to Govt | Paid GST liability ₹10,800 | GST Output A/C ₹10,800 | Cash/Bank A/C ₹10,800 |
| Claim of Input Tax Credit | Adjust GST input against output GST ₹9,000 | GST Output A/C ₹9,000 | GST Input A/C ₹9,000 |
| Purchase of Services (GST Paid) | Purchased services ₹20,000 + GST 18% | Expense/Service A/C ₹20,000
GST Input A/C ₹3,600 |
Cash/Bank A/C ₹23,600 |