0GST Basics
1. What is GST
Goods and Services Tax is an indirect, destination based tax on supplies of goods and services. A seller generally collects tax from the customer and pays it to the government after adjusting eligible tax already paid on purchases. The final consumer generally bears the tax.
Purchase → input GST credit → sale → output GST liability → adjustment → net payment
2. Which tax appears on an invoice
| Supply | Tax | Example at 18% |
| Within a state | CGST + SGST | 9% CGST + 9% SGST |
| Between states | IGST | 18% IGST |
| Within applicable union territory | CGST + UTGST | 9% CGST + 9% UTGST |
The place of supply and the supplier’s location determine whether a supply is intra state or inter state; physical movement alone is not always enough, especially for services.
3. Input and output GST
Input GST is tax charged on business purchases. When credit is available, record it separately as an asset or tax credit, rather than adding it to the purchase cost. Output GST is tax charged on sales and is a liability until discharged. If credit is not available, include the tax in the relevant expense or asset cost, as appropriate.
Illustration: goods purchased for ₹10,000 plus 18% GST = ₹11,800 payable. Goods sold for ₹15,000 plus 18% GST = ₹17,700 receivable. Output GST ₹2,700 less eligible input GST ₹1,800 gives net GST ₹900, assuming credits and liabilities can be legally adjusted in the relevant heads.
4. Journal entries
Intra state purchase on credit ₹10,000 plus 18%
Purchases A/c Dr 10,000
Input CGST A/c Dr 900
Input SGST A/c Dr 900
To Supplier A/c 11,800
Intra state sale on credit ₹15,000 plus 18%
Customer A/c Dr 17,700
To Sales A/c 15,000
To Output CGST A/c 1,350
To Output SGST A/c 1,350
Adjustment and payment
Output CGST A/c Dr 900
To Input CGST A/c 900
Output SGST A/c Dr 900
To Input SGST A/c 900
Output CGST A/c Dr 450
Output SGST A/c Dr 450
To Bank A/c 900
Inter state purchase ₹10,000 plus 18%
Purchases A/c Dr 10,000
Input IGST A/c Dr 1,800
To Supplier A/c 11,800
5. Quick checks
- GST on a taxable sale is output tax, even if the customer has not paid yet under ordinary invoice accounting.
- A tax invoice and satisfaction of statutory conditions are needed before treating input GST as eligible credit.
- Purchase returns reverse the purchase and related input tax; sales returns reverse the sale and related output tax.
- For an exempt sale, no output tax is charged. Input credit attributable to exempt supplies is generally restricted.
- If an item is bought for personal use, do not automatically claim input tax credit.
6. Practice
A registered trader in Tamil Nadu buys goods locally for ₹20,000 plus 18% GST on credit, then sells them locally for ₹30,000 plus 18% GST on credit. Pass purchase and sale entries. Calculate output GST, input GST and net tax under each head. Answer: CGST ₹900 payable and SGST ₹900 payable.
