ACCOUNTING OF GST PAID (INPUT GST)

When GST Paid on Supply (Purchase) can be set off against GST Collected?

GST Paid on purchase of goods and/or services or both that can be set off against; GST Collected on sale of goods and/or services or both is debited to a separate, account head, i.e., Input CGST or Input SGST or Input IGST as the case Thus, GST Paid on purchases of goods and/or services or both that can be set off against GST Collected is debited to Input GST (under CGST, SGST or IGST as per category of GST Paid) Account. Therefore, accounting of GST Paid on purchase of goods and/or services or both differ depending on whether GST Paid can be set off against GST Collected or not

When GST Paid on Supply (Purchase) cannot be set off against GST Collected?

GST Paid on purchase of goods and/or services or both that cannot be set off against GST Collected on sale of goods and/or services or both is debited to the expense head or asset head on which it has been paid. Stating differently, it is accounted as cost. For example, Mohit visits a restaurant and paid a bill or 1,200 inclusive of CGST 100 and SGST 100. GST Paid for food and beverages bill is not allowed to be set off against GST Collected (Output GST). It means that Mohit should debit Business Promotion Account by 1,200.

Examples of supply/Purchase of Services/goods on which GST Paid cannot be set off and thus,is Cost are:

      (i)Food and Beverage Expenses (Restaurant Bills);

(ii)Membership Fee of Club, Health and Fitness Centre;

(iii)Health Insurance;

(iv) Repairs and Maintenance (Building);

(v) Free Gifts to Staff;

(vi) Purchase of Vehicles by a non-transport enterprises;

(vii) Goods and/or Services for personal consumption; and

(viii) Goods and/or services purchased for sale which are exempt from levy of GST.

 GST paid (Input GST) is reversed in the following cases:

        (i)Goods lost or stolen;

  (ii) Goods destroyed;

      (iii)Goods written off;

      (iv) Goods given as gift (charity);

      (v) Goods given as free sample; and

      (vi) Goods as may be prescribed.

Supply of following Goods and/or services are exempt from levy of GST:

        (i)Salaries and wages;

   (ii) Supply of services to Government;

       (iii)Supply to embassies of other countries/ UNO;

       (iv)Educational services;Health services; and

       (v) Electricity and water bills.