Issue with gst

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This query is : Resolved

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A client has been debiting GST to their Profit & Loss account for the past two years, treating it as an expense. The discussion clarifies that this is a valid accounting method, though not the standard approach. The client wishes to switch to balance sheet accounting for GST input tax credit (ITC) and seeks guidance on rectifying past entries and making the transition from April 1st.

Truly Krazy

Truly Krazy (Querist)

18 September 2023 My client has shown puchase and sale (inclusive of gst) and debited gst from p&l for last 2 years as expense . is it wrong ? how to recitfy it

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

18 September 2023 Not wrong it's another way of accounting.
No need to rectify it.
If you want to switch over do it from 1st April.

Truly Krazy

Truly Krazy (Querist)

18 September 2023 the client is under regular scheme. how will he justify the itc claimed as he has not mentioned it under duties and taxies.
Also , YES we want to switch it over so how to pass the adjustment entry to include gst it in the balance sheet. As in what should be adjusted against the gst balance in order to match it the available ITC balance on gst portal

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

18 September 2023 Debit p and l and credit ITC liability (balance sheet) , ITC pending as per credit ledger.

Truly Krazy

Truly Krazy (Querist)

18 September 2023 The balance has to be shown as GST reversable. so we have to show it as other income ?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

18 September 2023 No, it's ITC claimable in case ITC credit in credit ledger. It's a debit to p and l as GST expenses.
Tell me what is your year end balance in GST credit ledger.

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