GST Journal Entries: Sales, Purchases, Reverse Charge and Monthly Set-Off
Keep separate input and output ledgers for CGST, SGST and IGST, plus reverse-charge payable ledgers. Record tax on each sale and purchase, post input tax only when the invoice is in GSTR-2B, and pass a monthly set-off entry that mirrors GSTR-3B, paying reverse-charge tax in cash.
Most GST mismatches start in the books, not on the portal. Keep the right ledgers and post the same few entries every month, and the books will agree with GSTR-3B.
The ledgers
| Ledger | Type |
|---|---|
| Output CGST, Output SGST, Output IGST | Liability |
| Input CGST, Input SGST, Input IGST | Asset |
| RCM payable (CGST, SGST, IGST) | Liability |
| Electronic cash ledger | Asset |
| GST interest and late fee | Expense |
Sales within the state
Sale of ₹1,00,000 plus 18% GST to a customer in the same state:
| Account | Debit | Credit |
|---|---|---|
| Customer | ₹1,18,000 | |
| Sales | ₹1,00,000 | |
| Output CGST | ₹9,000 | |
| Output SGST | ₹9,000 |
For an inter-state sale, credit Output IGST ₹18,000 instead.
Purchases
Purchase of ₹50,000 plus 18% GST from a supplier in another state:
| Account | Debit | Credit |
|---|---|---|
| Purchases | ₹50,000 | |
| Input IGST | ₹9,000 | |
| Supplier | ₹59,000 |
Post input tax only when the invoice is in GSTR-2B. Until then, park it in an "input awaiting 2B" ledger.
Reverse charge
Rent of ₹40,000 from an unregistered landlord (commercial property, same state):
| Account | Debit | Credit |
|---|---|---|
| Rent | ₹40,000 | |
| Input CGST | ₹3,600 | |
| Input SGST | ₹3,600 | |
| Landlord | ₹40,000 | |
| RCM payable CGST | ₹3,600 | |
| RCM payable SGST | ₹3,600 |
Monthly set-off
At month end, set input against output in the order the law requires (IGST credit first), and pay the rest in cash. Suppose output CGST and SGST are ₹9,000 each, output IGST is nil, input IGST is ₹9,000, and RCM payable is ₹3,600 each:
| Account | Debit | Credit |
|---|---|---|
| Output CGST | ₹9,000 | |
| Input IGST | ₹9,000 | |
| Output SGST | ₹9,000 | |
| RCM payable CGST | ₹3,600 | |
| RCM payable SGST | ₹3,600 | |
| Electronic cash ledger | ₹16,200 |
(Reverse-charge tax is always paid in cash.) The same entry should mirror Table 6 of your GSTR-3B.
Month-end checks
- Output tax in the books equals GSTR-1 and GSTR-3B.
- Input tax in the books equals the credit claimed, and is supported by GSTR-2B.
- The "input awaiting 2B" ledger is reviewed and cleared.
- Cash ledger balance in books matches the portal.
Frequently asked questions
Should GST be part of the purchase cost?
Only when credit is not available, such as blocked credit or exempt business. Then add it to the cost.
Do I need separate ledgers for each rate?
Not necessarily. Separate ledgers by tax type are enough; rate-wise reports come from invoice data.
How do I record a credit note?
Reverse the original entry for the amount of the credit note, including the tax.
Sources
This is a practical guide. Confirm your chart of accounts with your accountant.
Written by
Founder, Airwix Technologies (Sleet)
Vatsal Sutariya is the founder of Airwix Technologies in Ahmedabad, the company that builds Sleet: SleetHR for HR and payroll, and Sleet Accounting for GST billing and books. He writes about GST, invoicing, business tax and choosing software for Indian businesses, and checks each rule against the official notification before it is published.
LinkedIn profile →