Goods and Services Tax
GST & Journal Entries
Master GST — India's most important indirect tax. Understand CGST, SGST, IGST, Input Tax Credit, and how to pass journal entries for intra-state and inter-state transactions. Directly tested in CBSE boards and CUET.
3GST Types
20MCQs
20Quiz Qs
FreeAlways
📌 Why GST Is Essential for Accountancy Students
India's Biggest Tax Reform Since Independence
GST replaced over 17 central and state taxes from 1 July 2017. For accountancy students, it is critical because every purchase and sale entry now includes GST accounts. If you cannot pass GST-based journal entries, you cannot score full marks in board exams from Chapter 7 onwards.
1. Meaning of GST
Goods and Services Tax (GST) is a comprehensive, multi-stage, destination-based indirect tax levied on the supply of goods and services in India. It replaced taxes like VAT, Service Tax, Central Excise Duty, CST and others.
Key features of GST: Indirect tax (paid by consumer, collected by business) | Multi-stage (levied at every stage of supply chain) | Destination-based (tax goes to the state where goods are consumed, not produced) | Based on Input Tax Credit mechanism
2. Types of GST — CGST, SGST, IGST
C
CGST — Central GST
Collected by the Central Government. Applicable on intra-state (within same state) transactions. Always charged alongside SGST. Rate = half of total GST rate.
S
SGST — State GST
Collected by the State Government. Applicable on intra-state transactions. Always charged alongside CGST. Rate = half of total GST rate.
I
IGST — Integrated GST
Collected by the Central Government. Applicable on inter-state (between two different states) transactions AND on imports. Rate = full GST rate (CGST + SGST combined).
Golden Rule — which GST applies:
Buyer and Seller in same state → CGST + SGST (each at half the rate)
Buyer and Seller in different states → IGST only (at full rate)
Example: GST rate 18%. Delhi to Delhi → CGST 9% + SGST 9%. Delhi to Mumbai → IGST 18%.
Buyer and Seller in same state → CGST + SGST (each at half the rate)
Buyer and Seller in different states → IGST only (at full rate)
Example: GST rate 18%. Delhi to Delhi → CGST 9% + SGST 9%. Delhi to Mumbai → IGST 18%.
3. Key GST Terms for Journal Entries
| Term | Meaning | Account Type |
|---|---|---|
| Input GST / GST Input Credit | GST paid on purchases — recoverable from government. Treated as an asset. | Real A/c (Asset) — Dr. when paid on purchase |
| Output GST / GST Payable | GST collected on sales — payable to government. Treated as a liability. | Personal A/c (Liability) — Cr. when collected on sale |
| Input Tax Credit (ITC) | GST paid on purchases is set off against GST collected on sales. Only the net amount is paid to government. | ITC reduces GST liability |
| GST Payable to Govt. | Output GST − Input GST = Net GST payable. If Input > Output → refund claimed. | Liability — paid in cash/bank |
4. Journal Entries — Intra-State Transactions (CGST + SGST)
When buyer and seller are in the same state, CGST and SGST are charged separately, each at half the GST rate.
📈 Case 1 — Intra-State Purchase (Cash)
Goods purchased for cash ₹1,00,000 + GST @18% (intra-state, Delhi to Delhi)
CGST 9% + SGST 9%
| Date | Particulars | L.F. | Dr. (₹) | Cr. (₹) |
|---|---|---|---|---|
| Apr 1 | Purchases A/c Dr. | 1,00,000 | ||
| Input CGST A/c Dr. | 9,000 | |||
| Input SGST A/c Dr. | 9,000 | |||
| To Cash A/c | 1,18,000 | |||
| (Goods purchased for cash ₹1,00,000 + CGST @9% ₹9,000 + SGST @9% ₹9,000. Total cash paid ₹1,18,000) | ||||
Input CGST and Input SGST are ASSETS (we can recover these from government via ITC). Cash paid = Cost + CGST + SGST = ₹1,00,000 + ₹9,000 + ₹9,000 = ₹1,18,000.
📈 Case 2 — Intra-State Sale (Cash)
Goods sold for cash ₹1,50,000 + GST @18% (intra-state)
CGST 9% + SGST 9%
| Date | Particulars | L.F. | Dr. (₹) | Cr. (₹) |
|---|---|---|---|---|
| Apr 5 | Cash A/c Dr. | 1,77,000 | ||
| To Sales A/c | 1,50,000 | |||
| To Output CGST A/c | 13,500 | |||
| To Output SGST A/c | 13,500 | |||
| (Goods sold for cash ₹1,50,000 + CGST @9% ₹13,500 + SGST @9% ₹13,500. Total cash received ₹1,77,000) | ||||
Output CGST and Output SGST are LIABILITIES (we collected these from customer and must pay to government). Cash received = Sales + CGST + SGST = ₹1,50,000 + ₹13,500 + ₹13,500 = ₹1,77,000.
📈 Case 3 — Intra-State Credit Purchase
Goods purchased on credit from Ramesh ₹80,000 + GST @12% (intra-state)
CGST 6% + SGST 6%
| Date | Particulars | L.F. | Dr. (₹) | Cr. (₹) |
|---|---|---|---|---|
| Apr 8 | Purchases A/c Dr. | 80,000 | ||
| Input CGST A/c Dr. | 4,800 | |||
| Input SGST A/c Dr. | 4,800 | |||
| To Ramesh A/c | 89,600 | |||
| (Credit purchase from Ramesh ₹80,000 + CGST @6% ₹4,800 + SGST @6% ₹4,800. Total payable to Ramesh ₹89,600) | ||||
Ramesh's account is credited with the full amount including GST (₹89,600) because that is what we owe him. The GST components are separately debited as assets (Input CGST, Input SGST).
📈 Case 4 — Intra-State Credit Sale
Goods sold on credit to Priya ₹60,000 + GST @12% (intra-state)
CGST 6% + SGST 6%
| Date | Particulars | L.F. | Dr. (₹) | Cr. (₹) |
|---|---|---|---|---|
| Apr 10 | Priya A/c Dr. | 67,200 | ||
| To Sales A/c | 60,000 | |||
| To Output CGST A/c | 3,600 | |||
| To Output SGST A/c | 3,600 | |||
| (Credit sale to Priya ₹60,000 + CGST @6% ₹3,600 + SGST @6% ₹3,600. Total receivable from Priya ₹67,200) | ||||
Priya's account is debited with the full amount including GST (₹67,200) because that is what she owes us. Output CGST and Output SGST are liabilities — we collected them and must remit to government.
5. Journal Entries — Inter-State Transactions (IGST Only)
When buyer and seller are in different states, only IGST is charged at the full rate. No CGST or SGST.
📈 Case 5 — Inter-State Purchase (Cash)
Goods purchased from Mumbai supplier for cash ₹2,00,000 + GST @18% (Delhi buyer)
Inter-state → IGST 18% only
| Date | Particulars | L.F. | Dr. (₹) | Cr. (₹) |
|---|---|---|---|---|
| Apr 12 | Purchases A/c Dr. | 2,00,000 | ||
| Input IGST A/c Dr. | 36,000 | |||
| To Cash A/c | 2,36,000 | |||
| (Inter-state purchase for cash ₹2,00,000 + IGST @18% ₹36,000. Total cash paid ₹2,36,000) | ||||
Inter-state transaction → IGST only. No CGST or SGST. Input IGST ₹36,000 is an asset (recoverable). Cash paid = ₹2,00,000 + ₹36,000 = ₹2,36,000.
📈 Case 6 — Inter-State Credit Sale
Goods sold on credit to Anil (Chennai) ₹1,20,000 + GST @18% (Delhi seller)
Inter-state → IGST 18% only
| Date | Particulars | L.F. | Dr. (₹) | Cr. (₹) |
|---|---|---|---|---|
| Apr 15 | Anil A/c Dr. | 1,41,600 | ||
| To Sales A/c | 1,20,000 | |||
| To Output IGST A/c | 21,600 | |||
| (Inter-state credit sale to Anil ₹1,20,000 + IGST @18% ₹21,600. Total receivable ₹1,41,600) | ||||
Output IGST ₹21,600 is a liability. Anil owes us ₹1,41,600 (including IGST). Since Anil is in another state, IGST goes to Central Government which then settles with the destination state.
6. Input Tax Credit (ITC) Set-off and Payment to Government
At the end of the period, GST payable to government = Output GST − Input GST. The ITC set-off entry and payment entry are recorded as follows:
📈 Case 7 — ITC Set-off and GST Payment
Output CGST ₹13,500; Input CGST ₹9,000. Net CGST payable ₹4,500. Similarly for SGST.
Set-off ITC, then pay net GST
| Date | Particulars | L.F. | Dr. (₹) | Cr. (₹) |
|---|---|---|---|---|
| Apr 30 | Output CGST A/c Dr. | 13,500 | ||
| To Input CGST A/c | 9,000 | |||
| To GST Payable A/c (CGST) | 4,500 | |||
| (Output CGST ₹13,500 set off against Input CGST ₹9,000. Net CGST payable ₹4,500) | ||||
| Apr 30 | Output SGST A/c Dr. | 13,500 | ||
| To Input SGST A/c | 9,000 | |||
| To GST Payable A/c (SGST) | 4,500 | |||
| (Output SGST ₹13,500 set off against Input SGST ₹9,000. Net SGST payable ₹4,500) | ||||
| Apr 30 | GST Payable A/c (CGST) Dr. | 4,500 | ||
| GST Payable A/c (SGST) Dr. | 4,500 | |||
| To Bank A/c | 9,000 | |||
| (Net GST paid to government by cheque: CGST ₹4,500 + SGST ₹4,500 = ₹9,000) | ||||
ITC rule: CGST Input can only set off CGST Output and IGST Output (in that order). SGST Input can only set off SGST Output and IGST Output. IGST Input can set off IGST, CGST, and SGST Output (in that order).
7. GST Rates in India (Common Slabs)
| GST Rate | CGST | SGST | IGST | Examples |
|---|---|---|---|---|
| 0% | 0% | 0% | 0% | Essential food items, fresh vegetables, milk |
| 5% | 2.5% | 2.5% | 5% | Sugar, tea, coffee (not instant), edible oils |
| 12% | 6% | 6% | 12% | Butter, cheese, frozen meat, mobile phones |
| 18% | 9% | 9% | 18% | Most goods and services — the standard rate |
| 28% | 14% | 14% | 28% | Luxury cars, tobacco, aerated drinks |
8. CGST vs SGST vs IGST — Summary
| Point | CGST | SGST | IGST |
|---|---|---|---|
| Full form | Central GST | State GST | Integrated GST |
| Collected by | Central Govt. | State Govt. | Central Govt. |
| When applicable | Intra-state only | Intra-state only | Inter-state only |
| Rate (if total 18%) | 9% | 9% | 18% |
| Appear together? | Always with SGST | Always with CGST | Alone (no CGST/SGST) |
| Input A/c name | Input CGST A/c | Input SGST A/c | Input IGST A/c |
| Output A/c name | Output CGST A/c | Output SGST A/c | Output IGST A/c |
⚡ Quick Recall — Chapter 8 GST Key Points
GST = Goods and Services Tax. Indirect, multi-stage, destination-based. Replaced VAT, Service Tax, Excise Duty etc. from 1 July 2017.
Same state transaction → CGST + SGST (each at half rate). Different state → IGST only (full rate).
Input GST (on purchases) = ASSET. Output GST (on sales) = LIABILITY. ITC = Input set off against Output.
Purchase entry: Purchases Dr + Input CGST Dr + Input SGST Dr | To Cash/Creditor (total including GST).
Sale entry: Cash/Debtor Dr (total including GST) | To Sales + To Output CGST + To Output SGST.
Inter-state purchase: Purchases Dr + Input IGST Dr | To Cash/Creditor. Inter-state sale: Debtor Dr | To Sales + To Output IGST.
ITC set-off: Output GST Dr | To Input GST + To GST Payable. Then GST Payable Dr | To Bank.
CGST ITC can set off: CGST Output first, then IGST Output. SGST ITC: SGST Output first, then IGST Output. IGST ITC: IGST, CGST, SGST in that order.
GST slabs: 0%, 5%, 12%, 18%, 28%. Most common in problems: 12% and 18%.
Debtor/Creditor amounts include GST. Sales/Purchases amounts exclude GST (recorded at base price only).
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20 MCQs — GST & Journal Entries
Mixed difficulty — GST concepts, CGST/SGST/IGST identification, journal entry application, and numerical. Q17–Q20 are CUET-level.
📄 Questions 1 to 20
1
GST was introduced in India on:
A1 April 2016
B1 July 2017
C1 January 2018
D1 April 2019
Answer: B — 1 July 2017. GST was implemented across India on 1 July 2017 under the Constitution (101st Amendment) Act 2016. It replaced multiple indirect taxes including VAT, Service Tax, and Central Excise Duty.
2
GST is a _____ based tax, meaning tax revenue goes to the state where goods are consumed.
AOrigin
BProduction
CDestination
DManufacturing
Answer: C — Destination-based. GST is destination-based, meaning tax revenue accrues to the consuming state, not the producing state. This replaced the origin-based system (like CST) where tax went to the producing state.
3
A Delhi seller sells goods to a Delhi buyer. Which GST is applicable?
AIGST only
BCGST + SGST
CCGST only
DSGST only
Answer: B — CGST + SGST. Both parties are in the same state (Delhi) → intra-state transaction → CGST (Central) + SGST (State) both apply at half the GST rate each. IGST applies only when buyer and seller are in different states.
4
A Mumbai seller sells goods to a Delhi buyer. Which GST is applicable?
AIGST only
BCGST + SGST
CCGST only
DCGST + IGST
Answer: A — IGST only. Mumbai (Maharashtra) and Delhi are different states → inter-state transaction → IGST at full rate. CGST and SGST are NOT applicable for inter-state transactions. Never charge both IGST and CGST/SGST together.
5
GST @18% applies on an intra-state sale. The CGST rate and SGST rate are:
ACGST 18%, SGST 0%
BCGST 0%, SGST 18%
CCGST 9%, SGST 9%
DCGST 18%, SGST 18%
Answer: C — CGST 9%, SGST 9%. For intra-state transactions, the total GST rate is split equally: CGST = half, SGST = half. So 18% total = CGST 9% + SGST 9%. The total tax burden on the buyer is always 18% regardless of how it is split.
6
Input CGST A/c and Input SGST A/c in the buyer's books are:
ALiabilities — money owed to government
BAssets — tax paid on purchases, recoverable via ITC
CExpenses — shown in P&L Account
DIncome — earned from sales
Answer: B — Assets. Input GST accounts represent GST paid on purchases which can be recovered from the government through Input Tax Credit. They are debit balance accounts (assets) and appear on the assets side of the Balance Sheet until set off.
7
Output CGST A/c and Output SGST A/c in the seller's books are:
AAssets — recoverable from government
BIncome — earned from selling
CLiabilities — GST collected from customer, payable to government
DExpenses — charged to P&L Account
Answer: C — Liabilities. Output GST accounts represent GST collected from customers on behalf of the government. The seller does not own this money — it must be remitted to the government. They have credit balances and appear on the liabilities side.
8
Intra-state credit purchase ₹50,000 + GST @12%. Total amount credited to Creditor's A/c is:
A₹50,000
B₹56,000
C₹56,000
D₹53,000
Answer: C — ₹56,000. GST @12% on ₹50,000 = ₹6,000 (CGST ₹3,000 + SGST ₹3,000). Creditor is owed the full amount including GST: ₹50,000 + ₹6,000 = ₹56,000. Entry: Purchases Dr ₹50,000 + Input CGST Dr ₹3,000 + Input SGST Dr ₹3,000 | To Creditor ₹56,000.
9
Cash received from intra-state cash sale of ₹80,000 + GST @18%. Total cash received is:
A₹80,000
B₹88,000
C₹94,400
D₹1,04,400
Answer: C — ₹94,400. GST @18% on ₹80,000 = ₹14,400. Total cash received = ₹80,000 + ₹14,400 = ₹94,400. Cash A/c Dr ₹94,400 | To Sales ₹80,000 + To Output CGST ₹7,200 + To Output SGST ₹7,200.
10
Inter-state credit sale of ₹1,00,000 + IGST @18%. The journal entry debits:
ASales A/c ₹1,00,000
BDebtor A/c ₹1,18,000
CDebtor A/c ₹1,00,000 and IGST A/c ₹18,000
DCash A/c ₹1,18,000
Answer: B — Debtor A/c Dr ₹1,18,000. For a credit sale, the Debtor is debited with the full amount including GST. Full entry: Debtor A/c Dr ₹1,18,000 | To Sales A/c ₹1,00,000 + To Output IGST A/c ₹18,000. The debtor owes us the base price PLUS the tax.
11
Input Tax Credit (ITC) means:
AGST refund received from government in cash
BGST paid on purchases set off against GST collected on sales, reducing net GST payable
CTax credit given by bank for GST payments
DDiscount on GST rate given to large businesses
Answer: B. ITC allows businesses to set off GST paid on purchases against GST collected on sales. Only the net amount (Output GST − Input GST) is deposited with the government. This avoids double taxation across the supply chain.
12
Output CGST ₹20,000; Input CGST ₹14,000. Net CGST payable to government is:
A₹20,000
B₹14,000
C₹6,000
D₹34,000
Answer: C — ₹6,000. Net CGST payable = Output CGST − Input CGST = ₹20,000 − ₹14,000 = ₹6,000. ITC set-off entry: Output CGST Dr ₹20,000 | To Input CGST ₹14,000 + To GST Payable (CGST) ₹6,000.
13
The correct journal entry for intra-state cash purchase of goods ₹40,000 + GST @18% is:
APurchases Dr ₹47,200; To Cash ₹47,200
BPurchases Dr ₹40,000; Input CGST Dr ₹3,600; Input SGST Dr ₹3,600; To Cash ₹47,200
CPurchases Dr ₹40,000; Input IGST Dr ₹7,200; To Cash ₹47,200
DPurchases Dr ₹40,000; GST Expense Dr ₹7,200; To Cash ₹47,200
Answer: B. Intra-state → CGST + SGST each at 9%. GST = ₹40,000 × 18% = ₹7,200 (CGST ₹3,600 + SGST ₹3,600). Total cash = ₹47,200. Option A is wrong (includes GST in Purchases). Option C is wrong (IGST for intra-state is incorrect).
14
Sales A/c in a GST-inclusive transaction is always credited with:
ATotal amount received including GST
BBase price of goods only (excluding GST)
CGST amount only
DBase price minus GST
Answer: B — Base price only (excluding GST). Sales A/c is always credited with the actual sale value of goods (ex-GST). GST collected is separately credited to Output CGST/SGST/IGST A/c. This keeps Sales revenue clean and separate from tax collected.
15
IGST collected by the Central Government is eventually:
AKept entirely by the Central Government
BReturned to the selling state
CApportioned between Centre and the destination (consuming) state
DGiven entirely to the buying state
Answer: C. IGST collected by the Central Government is apportioned between the Centre and the destination state (where goods are consumed). This ensures that the consuming state gets its share even in inter-state transactions.
16
GST is payable to the government when:
AGoods are purchased
BOutput GST exceeds Input GST (after ITC set-off)
CGoods are sold at a profit
DAt the end of the financial year only
Answer: B. GST is payable to government only when Output GST (collected on sales) exceeds Input GST (paid on purchases). If Input > Output, a refund is claimable. Net GST payable = Output GST − Input GST (after ITC).
17
CUET: Assertion (A): For an intra-state purchase, Purchases A/c is debited with the amount including GST. Reason (R): GST paid on purchases is an expense for the buyer.
ABoth A and R are true, and R correctly explains A
BBoth A and R are true, but R does not explain A
CA is false; R is false
DA is true; R is false
Answer: C — Both A and R are false. A is false: Purchases A/c is debited with base price ONLY (excluding GST). GST is separately debited to Input CGST/SGST A/cs. R is false: GST paid on purchases is NOT an expense — it is an asset (recoverable via ITC). Only non-registered businesses unable to claim ITC treat GST as expense.
18
CUET: Goods purchased from Pune (Maharashtra) by a Delhi (Delhi) business for ₹2,50,000 + GST @12%. Total amount payable and accounts debited are:
A₹2,80,000; Purchases Dr + Input CGST Dr + Input SGST Dr
B₹2,80,000; Purchases Dr + Input IGST Dr
C₹2,65,000; Purchases Dr + Input CGST Dr
D₹2,50,000; Purchases Dr only
Answer: B — ₹2,80,000; Purchases Dr + Input IGST Dr. Pune (Maharashtra) to Delhi = inter-state → IGST only. GST @12% on ₹2,50,000 = ₹30,000. Total payable = ₹2,80,000. Entry: Purchases Dr ₹2,50,000 + Input IGST Dr ₹30,000 | To Creditor ₹2,80,000.
19
CUET: Business had: Output CGST ₹36,000; Input CGST ₹22,000; Output SGST ₹36,000; Input SGST ₹22,000. Total GST paid to government by cheque is:
A₹72,000
B₹44,000
C₹28,000
D₹14,000
Answer: C — ₹28,000. Net CGST payable = ₹36,000 − ₹22,000 = ₹14,000. Net SGST payable = ₹36,000 − ₹22,000 = ₹14,000. Total paid by cheque = ₹14,000 + ₹14,000 = ₹28,000. Entry: GST Payable CGST Dr ₹14,000 + GST Payable SGST Dr ₹14,000 | To Bank ₹28,000.
20
CUET: Which combination of Input Tax Credit set-off is CORRECT as per GST rules?
ASGST Input can set off CGST Output first
BCGST Input can set off SGST Output first
CIGST Input can set off IGST, then CGST, then SGST Output (in that order)
DCGST Input can only set off CGST Output; no cross-adjustment allowed
Answer: C. GST ITC set-off order: CGST Input → CGST Output first, then IGST Output. SGST Input → SGST Output first, then IGST Output. IGST Input → IGST Output first, then CGST Output, then SGST Output. CGST and SGST Input cannot set off each other directly.
Chapter 8 — Live Quiz
20 questions · GST & Journal Entries · One at a time · Instant feedback
Question 1 of 20
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