ILLUSTRATIONS ON GST ACCOUNTING

Illustration 3

On 1 June, 2010, a dealer purchases one machine in a State for the total cost of Rs. 66,45,600 which includes input tax of Rs. 2,55,600. As per the State GST laws, input tax paid on purchase of machinery is adjustable as GST credit over 36 equal monthly installments beginning July 1, 2010. Till the end of the year, the dealer has not utilised the GST credit available on the machine.

Accounting Entries

Purchase of machinery Machinery A/c             Dr. Rs. 63,90,000 GST Credit Deferred (Capital Goods) A/c                   Dr. Rs. 2,55,600                         To Bank A/c Rs. 66,45,600 (Being machinery purchased and input tax paid)

Entry for Input Tax Credit GST Credit Receivable (Capital Goods) A/c                              Dr. . Rs. 7,100                 To GST Credit Deferred (Capital                 Goods) A/c            Rs. 7,100 (Being a portion of GST credit on purchase of machinery becoming available)

Dealer shall charge depreciation on the cost of machinery excluding GST credit (i.e., Rs. 66,45,600– Rs. 2,55,600 = Rs. 63,90,000).

Illustration 4

ABC Ltd. sold goods on 28th October,2009. He sells 710 units of product ‘X’ to Mr. Pranav for Rs. 71 per unit plus 12.5% GST. On 30th June, 2010, Mr. Dharam becomes insolvent. As per the relevant State GST laws, in this situation, ‘ABC’ Ltd. is not liable to pay GST.

Accounting Entries

Sale of Goods B A/c                               Dr. Rs. 79,875 To Sales Rs. 71,000 To GST Payable Account Rs. 8,875 (Being sale of goods on credit to ‘Mr. Pranav’)

Mr. Dharam becomes insolvent GST Payable A/c                      Dr. . Rs. 8,875 Bad Debts A/c                           Dr. Dr Rs. 71,000 To Mr. Dharam Rs. 79,875 (Being bad debts written off on Mr. Dharam becoming insolvent)

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