GST

GST is a comprehensive, multi-stage, destination-based tax that is levied on every value addition in the production and distribution chain. It is designed to replace multiple indirect taxes like the Value Added Tax (VAT), Service Tax, Central Excise Duty, and others, with a single unified tax system. GST is intended to simplify the tax structure and improve compliance, ensuring a more transparent and efficient taxation process.

Key Features of GST:

1. Single Tax for All Goods and Services:
   • Under GST, all goods and services are taxed under one unified tax system, reducing the need for multiple taxes at different stages of production and distribution.
2. Destination-Based Taxation:
   • The tax is levied at the place of consumption rather than the place of origin. This means that the state where the goods or services are consumed (not where they are produced) receives the revenue.
3. GST is Collected at Each Stage:
   • GST is collected at every stage of the production and distribution chain, but the tax burden is shared by all parties involved. Businesses can set off the tax paid on inputs against the tax they collect on output (input tax credit).
4. Input Tax Credit (ITC):
   • Businesses can claim credit for the GST paid on their purchases of goods and services used to produce their own goods or services. This helps in preventing cascading taxes (tax on tax).
5. Dual GST Structure:
   • In India, GST is implemented as a dual tax system, consisting of:
     • Central GST (CGST): Tax collected by the central government on intra-state sales.
     • State GST (SGST): Tax collected by the state government on intra-state sales.
     • Integrated GST (IGST): Tax levied on inter-state sales, which is collected by the central government.

GST Rates:

GST is categorized into different rate slabs based on the type of goods or services. The typical rate structure in India includes:

• 5%: For essential goods (e.g., food items, medicines)
• 12%: For moderate goods and services
• 18%: Standard rate for most goods and services
• 28%: For luxury and non-essential goods (e.g., automobiles, premium goods)

Some items, like certain food staples and medicines, may be exempt from GST.

Benefits of GST:

1. Simplified Tax Structure: It eliminates the cascading effect of taxes, as businesses can claim credit for taxes paid on inputs.
2. Boost to the Economy: By streamlining tax systems and reducing the tax burden on businesses, GST is expected to foster growth in various sectors.
3. Increased Compliance: The implementation of GST encourages better record-keeping, leading to improved tax compliance.
4. Reduction in Costs: Reduced cost of production due to easier flow of credit, which can lead to lower prices for consumers.

Challenges with GST:

• Implementation Issues: The initial implementation of GST faced challenges like system bugs, complexity in tax filing, and transitional issues.
• High Compliance Burden for Small Businesses: Small and medium-sized enterprises (SMEs) have often found the filing requirements and tax compliance burdens difficult to manage.
• Rates and Classification Issues: Confusion about the classification of goods and services under different GST slabs has also been a point of contention.

Conclusion:

GST aims to create a single market across the country by simplifying the taxation process and eliminating tax inefficiencies. While there have been challenges in its implementation, GST is seen as a significant step towards modernizing India’s indirect tax system and fostering economic growth.

If you want more details on specific aspects of GST or how it applies to a particular business sector, feel free to ask!

GST With Tally

Create a new company (Make sure state is specified) — GOT — Features (F11) —Enable Goods and
Services Tax — Yes
State — West Bengal
Registration type — Regular
GSTIN/UIN — 19AABCV0463C1ZM
Applicable from — 1.4.2021
Periodicity of GSTR – 1 — Monthly — CTRL + A — CTRL + A
Now, create a supplier ledger.
GOT — Create — Ledger —
Name — ABC Enterprise
Under — Sundry Creditors
Maintain balances bill by bill — Yes
State — West Bengal
Set/Alter GST details — Yes — Registration type — Regular — GSTIN/UIN — 19AABCV0463C1ZM — YES.

Name — Purchase A/C
Under — Purchase Accounts
Inventory values are affected — Yes
Is GST Applicable – Yes
Set/Alter GST Details — No
Type of Supply — Goods — Accept.
Name — CGST@9%
Under — Duties and Taxes
Type of Duty/Tax — GST
Tax Type — Central Tax
Percentage of Calculation – 9% — Yes —-Accept

Name — SGST@9%
Under — Duties and Taxes
Type of Duty/Tax — GST
Tax Type — State Tax
Percentage of Calculation — 9% — Yes — Accept.
GOT — Create— Stock Items —
Name — Wireless Keyboard
Under — Electronics
Unit — Pcs (UQC – Pcs-Pieces)
Is GST applicable — Applicable
Set/Alter GST details — Yes

Description — Wireless Keyboard (F12 — enable all options)
HSN — 8471
Calculation type — On value
Taxability — Taxable
Integrated Tax — 18%
CGST — 9%
SGST — 9%
CESS — 0%
Type of Supply — Goods — Accept.
GOT — Vouchers — Purchase Invoice (F9) — Configure (F12) — Modify tax rate details of GST – Yes.
After adding purchase ledger —- Classifications —- Select ‘Purchase Taxable’

Tax Analysis (Alt + A) — Detailed (Alt + A) — To know the taxable amount and total GST amount. — Accept.
How to check GST report?
GOT — Display — Statutory Reports — GST —- GSTR-1, GSTR-2, GSTR-3B
To check purchase entries throughout the entire period, go for GSTR-2.
Check B/S and the amount of Input GST will be shown in negative balance.
The negative balance in Duties and Taxes means there is no liability to the Government.
Next,
Sales entry on F8

Tax Classification — Sales Taxable.
GOT — Display — Statutory Reports — GST —- GSTR-1, GSTR-2, GSTR-3B
To check sales entries throughout the entire period, go for GSTR-1.
Another sales entry:
Sales to Consumer.

Tax Classification — Sales to Consumer – Taxable.
Now, Duties and Taxes is showing positive balance which ensures there is some liability to the
Government.
After adjustment entry, pay the balance liability on F5 — Alt + S (Stat Payment)

ISD

Create a new company for head office — Add GST informations.
Create Ledgers.

1. Supplier — Under — Sundry Creditors
2. Delhi Branch —- Under — Sundry Debtors — Change state — 07AAFFR9383Q1Z7
3. CGST — Under — Duties & Taxes
4. SGST — Under — Duties & Taxes
5. IGST — Under — Duties & Taxes
6. Advertisement — Under — Indirect Expenses
   Next, post a purchase entry as head office purchases service from an advertising company.
   GOT — Vouchers — Purchase (F9) — Change Mode (CTRL + H) — Accounting Invoice.

Check Balance Sheet — Input tax credit shows under Duties & Taxes
As we know head office cannot use this ITC so it has to distribute it to the branch in Delhi.
But, since the ITC is in the form of intrastate inward supply, before sharing it with Delhi branch,
it needs to transfer to IGST.
GOT — Vouchers — Journal (F7) —
Dr. IGST ————————– 1800
Cr. CGST —————————————– 900
Cr. SGST —————————————- 900 — Accept.

Now, the ITC amount is converted to IGST and it can be shared with Delhi Brach.
GOT — Vouchers — Journal (F7) — Stat Adjustment (Alt + J) — Type of Tax — GST — Nature of
Adjustments — Reversal of Input Tax Credit — Additional Details — ISD Credit Note

Go to GSTR – 3B report — Eligible ITC — Reversed ITC — Others.
Change company — Move to the branch company —Create ledgers

1. Head office — Under — Sundry Debtors
2. IGST — Under — Duties & Taxes
   Branch Company has to collect ITC from ISD head office.
   GOT — Vouchers — Journal — Stat Adjustment (Alt + J) — Type of tax — GST — Nature of
   Adjustments — Increase of Input Tax Credit — Additional Details — ISD Transfer
   Dr. IGST ———————————— 1800
   Cr. Head Office ————————————— 1800 — Accept.
   Check GSTR – 3B — Eligible ITC —- Inward Supplies from ISD.

Bank Loan and EMI

Create legers

1. PNB Bank Loan — Under — Secured Loans
2. SBI — Under — Bank Accounts
3. Interest Payment — Under — Indirect expenses
4. PNB Bank Loan Payable — Current Liabilities
5. Processing Charges — Under — Indirect Expenses — Is GST applicable – Yes — Set/Alter GST
   Details — Yes — GST rate – 18% — Type of Supply — Service
6. CGST — Under — Duties & Taxes
7. SGST — Under — Duties & Taxes
   

Months…PMT…PPMT…IPMT
1. ($4,257.50) ($4,090.83) ($166.67)
2. ($4,257.50) ($4,104.46) ($153.03)
3. ($4,257.50) ($4,118.15) ($139.35)
4. ($4,257.50) ($4,131.87) ($125.62)
5. ($4,257.50) ($4,145.65) ($111.85)
6. ($4,257.50) ($4,159.47) ($98.03)
7. ($4,257.50) ($4,173.33) ($84.17)
8. ($4,257.50) ($4,187.24) ($70.25)
9. ($4,257.50) ($4,201.20) ($56.30)
10. ($4,257.50) ($4,215.20) ($42.29)
11. ($4,257.50) ($4,229.25) ($28.24)
12. ($4,257.50) ($4,243.35) ($14.14)

1st entry — Loan Taken —
Receipt (F6), Date (F2) — 1.4.2021
Dr. SBI ————— 50000
Cr. PNB Bank Loan —————– 50000.
2nd entry — Payment of processing charges
Payment (F5), F2 — 1.4.2021
Dr. Processing charges ——– 1000
Dr. CGST————————90
Dr. SGST———————–90
Cr. Cash———————1180.

3rd entry — Create Loans payable on the last date of each month
Journal (F7), Date – 30.4.2021
Dr. PNB Bank Loan — 4090.83
Dr. Interest Payment — 166.67
Cr. PNB Bank Loan Payable —— 4257.50
4th entry — Pay the liability amount shown under PNB Bank Loan Payable in B/S.
Payment (F5) — Date — 1.5.2021
Dr. PNB Bank Loan Payable — 4257.50
Cr. SBI ———————– 4257.50 — Accept.

Deemed Export

Export of Goods means taking goods out of India to a place outside India. In the transaction of Deemed
exports the goods do not leave India though the goods are finally meant to be exported.
Section 16 of IGST tells that if a business sells to SEZ party, then the sale shall be considered as Zero
Rated Supply, that is similar to Export. This is not Deemed Export.
Section 2 states – Deemed Export means such supplies of goods as may be notified under section 147.
147 states – “The Government may, on the recommendations of the Council, notify certain supplies
of goods as deemed exports, where goods supplied do not leave India, and payment for such supplies
is received either in Indian rupees or in convertible foreign exchange, if such goods are manufactured
in India.”
Deemed Exports is only on goods not on services. Export can be on services; one can supply service to
SEZ also.
Here goods do not leave India, that is why it is not Export but Deemed Export. Payment also can be
received in Indian currency if not in convertible foreign exchange provided the goods are
manufactured in India.
Not all supplies, certain supplies can be deemed export.
Suppose, Mr. X is an exporter and supplies them to China. Section 16 tells not to charge GST to China
Company because this is zero rated supply. Suppose an invoice amount computed to 100000. No GST
is going to add to it.
Now the goods that were sold to China Company were purchased from Mr. A. Mr. A is the
manufacturer of the goods. Mr. A sold goods to Mr. X. Suppose GST computed to 90000.
But this 90000 ITC is useless for Mr. X since no liability arises by exporting to China Company.
Now, Mr. X can make all of his units to EOU or Export Oriented Unit. So, he cannot sell those units in
India. Only export can be made by him.
At the time of purchase Mr. X shall give Mr. A the certificate of EOU to Mr. A. Mr. A will not charge
anything to Mr. X. But, Mr. A has to pay tax on nominal rate as 0.1%. Such goods should be exported
by Mr. X within 90 days of the issue of tax invoice. The outward supply made by Mr. A to Mr. X is called
Deemed Export. Mr. A can claim the refund also. For obtaining refund the recipient or supplier of
deemed export supplies has to file an application in FORM GST RFD – 01.

DEPRECIATION

Create ledgers at first such as ‘Furniture’, ‘Computer’, ‘Plant and Machinery’ —- Under — Tangible
Assets (Fixed Assets) — Accept.
Post purchase entries to buy these assets.
GOT — Accounting Vouchers — F9 — CTRL + V (As Vouchers) — F12 — F12 — Allow expenses/Fixed
Assets in purchase vouchers — Yes.
Dr. Furniture —-15000
Cr. Supplier——-15000 –Accept.
Create another ledger which is ‘Depreciation’.
Under — Indirect Expenses.
GOT — Accounting Vouchers — Journal (F7) —
Dr. Depreciation ——– 14000
Cr. Furniture ——-1500
Cr. Computer——2500
Cr. Plant & Machinery —-10000 — Accept.
Check Balance Sheet to know the amount the fixed asset ledgers are holding to be transferred to the
next year.
And the total of depreciation amount is shown in Profit & Loss report.

Export under GST

The full form of LUT is Letter of Undertaking. It is a document that exporters can file to export goods or
services without having to pay taxes. Under the new GST regime, all exports are subject to IGST, which
can later be reclaimed via a refund against the tax paid.
You can record the export of goods using a sales voucher.
Who is eligible for LUT under GST?
Any registered taxpayer exporting goods or services can make use of LUTs. However, any person who
has been prosecuted for tax evasion for an amount of Rs. 2.5 Crores or above under the act is not
eligible to furnish LUTs.
In an export sales transaction, taxes are applicable based on the type of export.

1. Taxable export: integrated tax is applicable. Select ‘Exports Taxable’ as the Nature of
   Transaction in the sales ledger created for taxable export.
2. Exempt export: no tax is applicable. Select ‘Exports Exempt’ as the Nature of Transaction in the
   sales ledger.
3. Export under LUT/Bond: no tax is applicable. Select export LUT/Bond as the nature of
   transaction in the sales ledger created for exports under LUT/Bond
   Export under LUT/Bond is applicable when you have signed up a letter of undertaking with the
   department for the export of goods and services without payment of duty.