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Journal entries for GST liability paid for previous financial year

02 March 2024

If the GST liability for previous FY was shown 0 while income was there, how to show previous year's liability in current FY, when liability was paid using ITC along with the interest?

Looking for the relevant journal entries.

Thank you in advance.

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11 Replies

sabyasachi mukherjee (27029 Points)
Replied 02 March 2024

Pay liability

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prasad Nilugal ( GST Practitioner & Accounts ) (14374 Points)
Replied 02 March 2024

You have mentioned in the query, that previous year GST liability was 0 ( Zero) means no GST liability , then how we will pay the same in current F.Y . bit confusing please clarify.

Ritesh Bijlani (100 Points)
Replied 02 March 2024

In Books -- Book the liability in previous years only don't book in next year

In Income Tax -- If return is filed then go for revised return option but reflect liability in same year only

In GST -- In GST you can reflect the liability of one year in second year but upto September month of second year.

Shivani S (7 Points)
Replied 02 March 2024

Originally posted by : prasad Nilugal
	You have mentioned in the query, that previous year GST liability was 0 ( Zero) means no GST liability , then how we will pay the same in current F.Y . bit confusing please clarify.

Thank you for your reply. I realise the question wasn't fully detailed. Here are the details -

Income in 2022-23 was 'x' however, there was confusion regarding nature of income so GST liability in GSTR 1 was declared 0. [Since nature of income was not sales, GST wasn't charged either, but that's a different matter entirely].

While filing GSTR 9, in Dec 2023, it was advised that the liability be paid with interest to avoid issues since income was declared under Other Sources in 2022-23.

So, in 2023-24, the liability was paid with interest . Now this needs to reflect in this year's books.

While entries for GST paid through ITC and the penalty seem quite straightforward, I request guidance on how to show the GST liability in this year when the income is from previous year. Or if that liability is to be shown at all.

I hope this clarifies the problem/question.

I really appreciate your help.

Shivani S (7 Points)
Replied 02 March 2024

Originally posted by : Ritesh Bijlani
	In Books -- Book the liability in previous years only don't book in next yearIn Income Tax -- If return is filed then go for revised return option but reflect liability in same year onlyIn GST -- In GST you can reflect the liability of one year in second year but upto September month of second year.

Thank you for your reply sir, the issue is by the time this discrepancy was found, it was too late to update ITR. Please read above reply where I've mentioned details of the situation. I appreciate your support.

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Ritesh Bijlani (100 Points)
Replied 02 March 2024

In books -- Record the liability in FY 22-23 only. As you have shown as other income instead of that record sales invoice either service invoice with GST liability.

In GST -- You had shown in FY 22-23 GSTR9 with interest that is correct. GSTR9 is the final return which allows to book additional liability with interest.

In Income Tax -- File the updated return of FY 22-23 and pay the additional tax if arising either pay Rs.1000 as a late fee and make the financials perfect by recording liability in previous year.
overall record the liability in previous year only, Don't change the year in booking liability.

Yasaswi Gomes new (Finance ) (4492 Points)
Replied 03 March 2024

Make an entry in last years books of sales +GST liability because you now know the nature of transaction. Then in this years books pass this. This is plausible because no matter what type of forms you fill, reporting is just the same in prior period errors. Since you havent made any entries regarding sales, you can include them with disclosures.

Dr. GST liability

Dr. Interest expense

Cr. Bank

Shivani S (7 Points)
Replied 03 March 2024

Originally posted by : Yasaswi Gomes new
	Make an entry in last years books of sales +GST liability because you now know the nature of transaction. Then in this years books pass this. This is plausible because no matter what type of forms you fill, reporting is just the same in prior period errors. Since you havent made any entries regarding sales, you can include them with disclosures. Dr. GST liability Dr. Interest expense Cr. Bank

Thank you for your response ma'am. I've been told to maintain the closing balances of last year the same and instructed to add entries in this year only. Is there any way to do that for the GST liability? The entry for the liability has been added exactly as you have mentioned in your answer. In addition to that, is there any way to show that there was a liability from last year without modifying last year's books? Thank you.

Yasaswi Gomes new (Finance ) (4492 Points)
Replied 04 March 2024

Ok sir got you. The problem is, we can't change the opening balances. If you can make suspense entries in the last year and reverse it this year, it'll be ok. Because of the invoice dates we can't put the transaction in this year.