Purchase entry for Paddy & other Agricultural Product

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Manoj Chattopadhyay (Querist)
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08 July 2024 A partnership firm having two business. One is travel agency & 2nd is sale of paddy, including its seeds, and other agricultural products like wheat, jowar, maize, bajra, etc. which are non GST. One GST Registration done for these two business activities. GST invoice raised from Income from Travel Agency Business. & Other Business i.e.Sale of Paddy, seeds Non GST Sale shown in GSTR-1 as nil rated. But this paddy, seeds 1stly purchase & then sales. So my question is where I show the purchase entry in GST Return for 2nd business ?

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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10 August 2024 For a partnership firm with two distinct business activities—one being a travel agency (subject to GST) and the other dealing with agricultural products (non-GST)—the accounting and GST treatment for purchases and sales of these two businesses will differ. Here’s how you should handle the purchase entries and GST reporting for the agricultural products:

### **1. Understanding GST Implications for Agricultural Products:**

- **Agricultural Products:** Products like paddy, seeds, wheat, jowar, maize, and bajra are typically exempt from GST. This means there’s no GST levied on their sale.
- **GST Registration:** Even though these transactions are non-GST, having a GST registration for the firm means you must report these transactions accordingly.

### **2. Reporting Purchases and Sales in GST Returns:**

#### **Sales of Agricultural Products:**
- **GSTR-1 (Sales):** For sales of exempt agricultural products, you should report these in the GSTR-1 return.
- **HSN/SAC Code:** Use the relevant HSN/SAC code for the products and mention the sale as exempt.
- **Nil Rated or Exempt:** Show these sales as "exempt" or "nil-rated" in GSTR-1, depending on the specifics of the product and applicable rules.

#### **Purchases of Agricultural Products:**
- **GSTR-2A/2B (Purchases):** Since the agricultural products are exempt from GST, there will be no GST credit for these purchases. These purchases should still be recorded but do not attract any GST credit.
- **Purchase Entries:** Record these purchases as non-GST transactions in your accounting system.
- **No GST Input Credit:** Since there's no GST on these purchases, no input credit is available or claimable.

#### **Including Purchases in GST Return:**
- **GSTR-3B (Summary Return):** In GSTR-3B, you need to reflect the total value of purchases but without GST.
- **Box for Exempt Supplies:** Report the value of exempt supplies (i.e., the agricultural products) in the relevant section of GSTR-3B.
- **Box for Zero-Rated and Non-Taxable Supplies:** The purchases of agricultural products will fall under non-taxable supplies. Ensure to reflect this in the appropriate section.

### **Example of Reporting:**

#### **Purchases:**
- **Invoice Date:** Date of purchase invoice for agricultural products.
- **Amount:** Total purchase value.
- **GST Treatment:** No GST input credit applicable.
- **Journal Entry:**
```plaintext
Debit: Agricultural Products (Inventory) ₹ Amount
Credit: Bank/Cash or Accounts Payable ₹ Amount
```

#### **Sales:**
- **Invoice Date:** Date of sale invoice for agricultural products.
- **Amount:** Total sale value.
- **GST Treatment:** Exempt sale, no GST.
- **Journal Entry:**
```plaintext
Debit: Accounts Receivable ₹ Amount
Credit: Sales Revenue ₹ Amount
```

### **Key Points to Remember:**

- **Ensure Accurate Reporting:** Make sure that all non-GST sales and purchases are accurately reported in the GST returns.
- **Maintain Records:** Keep thorough records of all transactions, including exempt sales and non-GST purchases, for compliance and audit purposes.
- **Consult GST Professionals:** If there are complex aspects or changes in GST laws affecting your firm, consult with a GST professional to ensure compliance and correct reporting.

By following these guidelines, you can ensure that your GST returns are accurate and compliant with current regulations, even when dealing with both taxable and exempt business activities.

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