GST accounting entries, explained the simple way.

What are GST accounting entries?

GST accounting entries are the journal entries you pass to record Goods and Services Tax on a purchase or sale. GST is not part of your income or expense — it is a tax you collect on behalf of the government (on sales) and a tax you pay to your suppliers that you can claim back (on purchases). So every GST amount is recorded in its own account, separate from Purchases and Sales, and never mixed into them.

The core idea: tax you pay on purchases is Input GST — an asset, because you'll get it back as credit. Tax you collect on sales is Output GST — a liability, because you owe it to the government. At the end of the tax period, you set off Input against Output and pay only the difference in cash.

The GST ledger accounts you need

A GST-registered business keeps a small set of tax accounts in the ledger, in addition to its normal Purchases, Sales and party accounts. Here is what each one means and how it behaves.

Whether GST splits into CGST + SGST (for an intra-state transaction, within the same state) or a single IGST (for an inter-state transaction, across states) depends on the place of supply — not on where your registered office is. More on the split on our GST guide.

Live worked example — a full GST cycle

Meet Sharma Enterprises, a GST-registered trading firm in Pune (Maharashtra). Follow it through one full cycle: a purchase with input GST, a sale with output GST, setting off the input credit against the output liability, and paying the balance in cash. All transactions below are intra-state (within Maharashtra), so GST splits equally into CGST and SGST at 9% + 9% = 18%.

Step 1 — Purchase with input GST

Bought goods worth ₹1,00,000 on credit from Bharat Traders, plus 18% GST. Input tax is an asset — debited, because it will be claimed back.

Step 2 — Sale with output GST

Sold goods worth ₹1,50,000 on credit to Ramesh, plus 18% GST. Output tax is a liability — credited, because it is owed to the government.

Step 3 — Setting off ITC against output GST

At month-end, Sharma Enterprises has ₹9,000 Input CGST + ₹9,000 Input SGST available to claim, against ₹13,500 Output CGST + ₹13,500 Output SGST owed. CGST input can only reduce CGST (or IGST) output; SGST input can only reduce SGST (or IGST) output — the two cannot be cross-set. The full input is used up here:

No cash moves in this entry — it is purely adjusting one ledger balance against another. After this, Input CGST and Input SGST both show nil balance, and Output CGST and Output SGST each show a balance of ₹4,500 still payable (₹13,500 − ₹9,000).

Step 4 — Paying the balance GST in cash

The remaining ₹4,500 + ₹4,500 = ₹9,000 is deposited to the Electronic Cash Ledger and paid while filing GSTR-3B for July.

After this entry, every GST account nets to zero for July — proof that the tax has been correctly collected, claimed and paid. Each of the four journals above balances on its own, and together they show the complete cycle from purchase to payment.

Common mistakes & student tips

• Don't lump GST into Purchases or Sales. Tax always sits in its own Input/Output CGST, SGST or IGST account — never inside the goods account. Mixing them overstates your purchase cost or sales revenue.
• CGST input can't set off SGST output, and vice versa. Only IGST input is flexible — it can be set off against IGST, then CGST, then SGST output, in that order. CGST and SGST credits stay in their own lanes.
• Input GST is only an asset if you're eligible to claim it. Blocked credits (Section 17(5) — for example, GST on a motor car for personal use, or on inputs used for exempt supply) can't be claimed; add that GST to the cost of the purchase instead.
• Match your books to GSTR-2B, not just the supplier's invoice. You can only claim ITC that appears in your GSTR-2B for the period — if a supplier hasn't filed, the credit isn't available yet even if you hold a valid invoice.
• Round-trip check. In every GST entry, Debit must equal Credit — and separately, the tax amount should tie to (taxable value × GST rate). If either check fails, re-verify the rate or the split.

In TatvaBooks, this happens automatically

Passing these entries by hand is exactly how you learn GST accounting — and every CA Foundation student should be able to do it. But in a real, GST-registered business, doing this invoice by invoice is slow and easy to get wrong, especially the CGST/SGST vs IGST split and the set-off order. In TatvaBooks, every purchase and sale entry is generated for you: GST is worked out and split correctly based on the place of supply, Input and Output ledgers update automatically, GSTR-2B reconciliation tells you exactly what ITC you can claim, and the set-off and payment entries are ready when you file GSTR-3B — always tied to the rupee.

It's built by Chartered Accountants for Indian businesses, and it's free to start on the Solo plan. See how GST stays correct at the source on our GST billing software and cloud accounting software pages.

Frequently asked questions