By Admin 
When a business purchases goods or services, accounting entries must reflect both the cost of the purchase and the applicable GST. The GST component, whether CGST/SGST (for intra-state purchases) or IGST (for inter-state purchases), plays a crucial role in tracking Input Tax Credit (ITC) for GST filing. in this article we described about Purchase Entry with GST in Accounting Journal.
Components of Purchase Entry with GST
- Purchase Account: Records the cost of the goods or services bought.
- Input GST (CGST/SGST/IGST): These accounts capture the GST amount paid by the business. GST is split between CGST and SGST for intra-state transactions and represented by IGST for inter-state transactions.
- Payment Method (Cash/Bank/Accounts Payable): This shows how the payment was made, whether in cash, bank, or if it was credit (accounts payable).
Types of Transactions
- Intra-State Purchase (CGST + SGST): When goods are bought within the same state, GST is divided between the central government (CGST) and the state government (SGST).
- Inter-State Purchase (IGST): When goods are purchased from another state, Integrated GST (IGST) is charged.
Example Journal Entries
Intra-State Purchase:
Let’s assume a business purchases goods worth ₹10,000 with 18% GST (CGST 9% + SGST 9%). Here’s how it would be recorded:
| Account | Debit | Credit |
| Purchases A/c | ₹10,000 | |
| Input CGST A/c | ₹900 | |
| Input SGST A/c | ₹900 | |
| Cash/Accounts Payable A/c | ₹11,800 |
Inter-State Purchase:
For the same transaction but with an inter-state supplier, IGST is charged at 18%.
| Account | Debit | Credit |
| Purchases A/c | ₹10,000 | |
| Input IGST A/c | ₹1,800 | |
| Cash/Accounts Payable A/c | ₹11,800 |
Why Accurate Recording is Important
Correctly entering purchases with GST allows businesses to claim input tax credit (ITC). ITC helps in offsetting the GST liability on sales, ensuring the company pays only the net GST amount (output GST minus input GST). Failure to correctly record these entries could lead to inaccurate tax filings and potential penalties.
Conclusion
Properly accounting for purchases with GST ensures that businesses can maximize their input tax credit and maintain compliance with GST regulations. For every purchase, the respective GST amount needs to be accounted for, ensuring that the correct journal entry is passed. Whether it’s an intra-state or inter-state purchase, keeping track of CGST, SGST, or IGST will help businesses efficiently manage their tax obligations.