Booking of Expenses inclusive of GST, against exempt supply

This query is : Resolved

Ajay Pandey (Querist)
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27 January 2020 Dear Expert,

A company Training Provided under Govt. Scheme. As there is no GST Taxable billing for Outward Services. Inward services received with ITC is not claimed by them.

Did they have to maintain an inward register with Vendor GST Number, tax Rate, GST Amount and show them in exempt services for GSTR3B?

Did they can book the expenses directly including the GST amount as they are not claiming any ITC. This will save unnecessary Data Entry time for Passing Entry in Tally as well as preparing inward register for GSTR3B as required by GST Consultant?

Currently they are passing below Entry
Dr.Professional Fees - 10000
Dr.Input CGST9% - 900
Dr.Input SGST9% - 900
Dr. Professional Fees - 1800 ( CGST9% + SGST9% Tax Amount Expense Out)
Cr.Input CGST9% - 900 (Input CGST9% Reversed)
Cr.Input SGST9% - 900 (Input SGST9% Reversed)
Cr. XYZ & Co. - 11800

Kindly advise, booking of expenses inclusive GST amount, as not availing any ITC for Exempt Supply/Services.

Thank you

Ajay Pandey

Ajay Pandey

Ajay Pandey (Querist)
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31 January 2020 Any one kindly reply

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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06 July 2024 Based on the scenario described, where a company is providing training under a government scheme and is not claiming Input Tax Credit (ITC) on inward services received, here's how the expenses can be booked in accounting and reported for GST purposes:

### Booking Expenses Inclusive of GST:

Since the company is not availing any ITC for the inward services received, they can book the expenses inclusive of GST. This approach simplifies accounting and avoids the need for reversing ITC entries. Here’s how the transaction can be recorded:

**Example Entry:**

1. **Debit: Professional Fees Expense Account** - Rs. 10,000
(This represents the gross amount paid to XYZ & Co. for professional fees.)

2. **Credit: Cash/Bank Account** - Rs. 11,800
(This represents the total amount paid, inclusive of CGST and SGST.)

### Explanation:

- **Booking Expenses:** By booking the expenses inclusive of GST, the company recognizes the total amount paid as an expense, simplifying the accounting process.

- **GST Treatment:**
- The GST amount (CGST and SGST) included in the payment to XYZ & Co. is treated as part of the expense.
- Since the company is not claiming ITC, there is no need to separately record or reverse ITC entries.

### Reporting for GST (GSTR-3B):

For reporting in GSTR-3B, here are the considerations:

- **Exempt Services:** Since the outward services provided by the company under the government scheme are exempt from GST, these should be reported in the appropriate section of GSTR-3B as exempt supplies.

- **Inward Services:** The inward services received with GST paid but without claiming ITC should be included in the exempt services category for reporting in GSTR-3B. It’s essential to maintain records of these inward services, including details like vendor GST number, tax rate, GST amount, etc., as required for compliance.

### Advantages:

- **Simplicity in Accounting:** Booking expenses inclusive of GST streamlines the accounting process and reduces the administrative burden of managing ITC reversals.

- **Compliance:** Maintaining records as per GST requirements ensures compliance with tax regulations, even though ITC is not claimed.

### Conclusion:

Booking expenses inclusive of GST and reporting exempt services in GSTR-3B aligns with the company's practice of not claiming ITC on inward supplies. This approach not only saves time on data entry but also ensures compliance with GST regulations effectively. It’s advisable to consult with a GST consultant or accountant to ensure all reporting requirements are met based on specific circumstances and regulatory updates.

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