GST Accounting: Journal Entries, Ledgers & Flow

Table of Contents

  1. Introduction
  2. Conceptual Framework
  3. Inter-State Transactions (IGST)
  4. Intra-State Transactions (CGST + SGST)
  5. Reversal of ITC
  6. GST Accounting Cheat Sheet

1. Introduction

GST accounting in India requires proper treatment of Input Tax Credit (ITC) and Output GST Liability. These entries must reflect the balances in the electronic ledgers: Electronic Credit Ledger (ECL), Electronic Liability Ledger (ELL), and Electronic Cash Ledger (ECL-Cash).

2. Conceptual Framework

2.1 Input GST

GST paid on purchases is recorded as an asset (ITC) since it can be used against future GST liability.

2.2 Output GST

GST collected on sales is recorded as a liability until remitted to the Government.

2.3 Electronic Ledgers

3. Inter-State Transactions (IGST)

3.1 Purchase with IGST

Purchase/Asset A/c        Dr 1,00,000
Input IGST A/c            Dr   18,000
     To Party A/c                         1,18,000

Explanation: Goods purchased for ₹1,00,000 with IGST 18% = ₹18,000. Purchases and input tax are debited as assets; party credited for total invoice value.

Impact: ITC recognized in books; liability to pay vendor = ₹1,18,000.

3.2 Transfer of ITC to Electronic Credit Ledger

IGST Electronic Credit Ledger A/c  Dr 18,000
     To Input IGST A/c                        18,000

Explanation: ITC moved from Input IGST to ECL for official utilization.

Impact: Input IGST cleared; ECL reflects ITC balance.

3.3 Sale with IGST

Debtors/Bank A/c              Dr 1,41,600
     To Sales A/c                              1,20,000
     To Output IGST A/c                          21,600

Explanation: Sale of ₹1,20,000 with IGST 18% = ₹21,600. Debtor debited for gross invoice; sales credited; output IGST liability credited.

Impact: P&L shows revenue; output tax liability created.

3.4 Transfer Output to Liability Ledger

    Output IGST A/c                         Dr. 21,600
    To IGST Liability Ledger A/c       21,600

Explanation: Output GST moved to liability ledger for settlement.

Impact: Liability to pay Govt updated.

3.5 Utilization of ITC against Liability

IGST Liability Ledger A/c       Dr 18,000
     To IGST ECL A/c                              18,000

Explanation: ITC utilized to reduce GST liability.

Impact: Cash outflow reduced.

3.6 Payment of Balance via Cash Ledger

IGST Liability Ledger A/c       Dr 3,600
     To Electronic Cash Ledger A/c                3,600

Explanation: Remaining GST liability paid through cash ledger.

Impact: Liability cleared; cash reduced.

4. Intra-State Transactions (CGST + SGST)

4.1 Purchase with CGST & SGST

Purchase/Asset A/c        Dr 1,00,000
Input CGST A/c            Dr    9,000
Input SGST A/c            Dr    9,000
     To Party A/c                         1,18,000

Explanation: Intra-state purchase, CGST 9% + SGST 9% = ₹18,000. Purchases and input taxes debited; party credited.

4.2 Transfer ITC to Electronic Credit Ledger

CGST ECL A/c    Dr 9,000
     To Input CGST A/c        9,000
SGST ECL A/c    Dr 9,000
     To Input SGST A/c        9,000

Explanation: Moves ITC to ECL accounts for utilization.

4.3 Sale with CGST & SGST

Debtors/Bank A/c          Dr 1,41,600
     To Sales A/c                    1,20,000
     To Output CGST A/c               10,800
     To Output SGST A/c               10,800

Explanation: Sale with CGST 9% + SGST 9%. Debtors = total invoice; sales and output GST credited.

4.4 Transfer Output to Liability Ledgers

   Output CGST A/c        Dr. 10,800
   To CGST Liability Ledger A/c  10,800

   Output SGST A/c        Dr 10,800
   To SGST Liability Ledger A/c    10,800

Explanation: Output GST moved to liability ledgers for final payment.

4.5 Utilization of ITC against Liability

CGST Liability Ledger A/c    Dr 9,000
     To CGST ECL A/c           9,000
SGST Liability Ledger A/c    Dr 9,000
     To SGST ECL A/c           9,000

Explanation: ITC used to reduce GST liability.

4.6 Payment of Balance via Cash Ledger

CGST Liability Ledger A/c    Dr 1,800
     To Electronic Cash Ledger A/c   1,800
SGST Liability Ledger A/c    Dr 1,800
     To Electronic Cash Ledger A/c   1,800

Explanation: Remaining GST liability paid through cash ledger.

5. Reversal of ITC (If Ineligible)

Input IGST / Input CGST / Input SGST A/c   Dr XXX
     To Expense / P&L A/c                     XXX

Explanation: If ITC is not eligible under GST law, it is reversed and charged to expense or P&L.

6. GST Accounting Cheat Sheet

Stage Inter-State (IGST Entry) Intra-State (CGST + SGST Entry) Explanation / Logic
Purchase Purchase Dr 1,00,000
Input IGST Dr 18,000
To Party Cr 1,18,000		 Purchase Dr 1,00,000
Input CGST Dr 9,000
Input SGST Dr 9,000
To Party Cr 1,18,000		 ITC on purchase recorded as asset; vendor credited for invoice amount.
Transfer to ECL IGST ECL Dr 18,000 → Input IGST Cr 18,000 CGST ECL Dr 9,000 → Input CGST Cr 9,000
SGST ECL Dr 9,000 → Input SGST Cr 9,000		 Input GST transferred to electronic ledger for utilization.
Sale Debtors Dr 1,41,600 → Sales Cr 1,20,000, Output IGST Cr 21,600 Debtors Dr 1,41,600 → Sales Cr 1,20,000, Output CGST Cr 10,800, Output SGST Cr 10,800 Sales recorded; output GST liability created.
Transfer Output to Liability IGST Liability Cr 21,600 → Output IGST Dr 21,600 CGST Liability Cr 10,800 → Output CGST Dr 10,800
SGST Liability Cr 10,800 → Output SGST Dr 10,800		 Output GST moved to liability ledger.
Utilization of ITC IGST Liability Dr 18,000 → IGST ECL Cr 18,000 CGST Liability Dr 9,000 → CGST ECL Cr 9,000
SGST Liability Dr 9,000 → SGST ECL Cr 9,000		 ITC used to reduce GST liability.
Payment via Cash Ledger IGST Liability Dr 3,600 → Cash Ledger Cr 3,600 CGST Liability Dr 1,800 → Cash Ledger Cr 1,800
SGST Liability Dr 1,800 → Cash Ledger Cr 1,800		 Remaining liability settled through cash ledger.
Reversal of ITC Input IGST Dr → Expense/P&L Cr Input CGST/SGST Dr → Expense/P&L Cr Ineligible ITC reversed to P&L as expense.