20 May 2019
I have query regarding GST. I am receiving amount from govt for the work done regarding construction. Total GST that to be received from govt is 12 percent but govt going to pay only 5percent and remaining amount to be availed from input tax or even the liability is more payment to be done through bank. Regarding this case I have clarity regarding what is need to credited but my doubt is what is to be debited. We can't debit the govt bcoz nothing is going to be received from govt. then what is to be debited. Please help me regarding this. Thanks in Advance😀
21 July 2024
In your scenario, where you are receiving a payment from the government for construction work and the GST applicable is 12%, but the government is paying only 5% and the remaining 7% is to be availed as input tax credit (ITC), here’s how you should account for it:
### Accounting Entries:
1. **Receipt of Payment (5% GST Amount):** - Debit: Bank Account (for the amount received from the government) - Credit: Revenue or Income Account (for the gross amount of the invoice including 5% GST)
2. **Recording of GST Liability and ITC:** - Debit: Input Tax Credit Receivable Account (for the 7% GST not received in cash but eligible as ITC) - Credit: Output GST Payable Account (for the 12% GST on the invoice)
Explanation: - When you invoice the government for the construction work, you would include the 12% GST in the invoice total. - Upon receiving payment from the government, you debit your Bank Account for the actual amount received (which includes only 5% of the GST amount). - Simultaneously, you credit your Revenue or Income Account for the full invoice amount including 5% GST. - The remaining 7% of the GST amount (the difference between 12% and 5%) is eligible for input tax credit. This is recorded by debiting the Input Tax Credit Receivable Account. - The Output GST Payable Account is credited for the full 12% GST on the invoice.
### Example Entry:
Assuming you invoice the government for construction work amounting to Rs. 1,00,000 + 12% GST (total Rs. 1,12,000):
- Debit Bank Account: Rs. 1,05,000 (amount received from govt, including 5% GST) - Credit Revenue Account: Rs. 1,12,000 (total invoice amount including 5% GST)
- Debit Input Tax Credit Receivable Account: Rs. 7,000 (7% GST eligible for ITC) - Credit Output GST Payable Account: Rs. 12,000 (total 12% GST on the invoice)
### Important Considerations:
- **Input Tax Credit Utilization:** Ensure you utilize the Input Tax Credit (ITC) against your output GST liability in subsequent GST returns. - **Timely Compliance:** Maintain accurate records and reconcile GST payable and receivable regularly to ensure compliance with GST regulations. - **Consultation:** For complex scenarios or specific details related to your business, it’s advisable to consult with a GST professional or accountant to ensure accurate accounting and compliance with GST laws.
By following these steps, you can appropriately account for the GST transaction where part of the GST is received in cash and the remaining is availed as input tax credit.
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