GST Payment Journal Entries, With Tally Ledger Heads

GST passes through the books in four steps: tax is collected on sales, paid on purchases, set off one against the other at month end, and the balance paid to the government. Each step is one journal entry. This guide gives the GST payment journal entry and the three entries that lead up to it, with a worked month-end example, the reverse charge entry, and where these ledgers sit in Tally.

The GST ledgers you need

Keep input and output tax in separate ledgers, and separate each by tax head. A business with both intra-state and inter-state supplies needs six at minimum:

• Output CGST, Output SGST (or UTGST), Output IGST — tax charged on your sales. Liabilities.
• Input CGST, Input SGST (or UTGST), Input IGST — tax paid on purchases that you can claim as credit. Assets.

Businesses under reverse charge add an RCM output ledger per head, so the tax payable in cash is visible on its own. Why CGST and SGST apply to some supplies and IGST to others is explained in CGST, SGST and IGST.

Journal entry for sales

An intra-state sale of ₹1,00,000 at 18%:

For an inter-state sale, a single credit of ₹18,000 goes to Output IGST instead. The GST is not income: it is collected on behalf of the government, and the sales account carries only the taxable value.

Journal entry for purchases

An intra-state purchase of ₹50,000 at 18%, where the credit is available:

If the credit is blocked — or you cannot claim it for another reason — the tax is added to the cost of the purchase instead of going to an input ledger. What qualifies is covered in what is input tax credit.

Month-end set-off entry

When GSTR-3B is filed, the input tax credit is used to discharge the output tax. The book entry mirrors it: debit the output ledgers, credit the input ledgers. The law fixes the order:

• IGST credit is used first against IGST, then against CGST and SGST.
• CGST credit can pay CGST and IGST, never SGST.
• SGST credit can pay SGST and IGST, never CGST.

The credit itself sits in the electronic credit ledger on the portal, and the cash you deposit sits in the electronic cash ledger; both are explained in electronic credit and cash ledger.

Journal entry for GST payment

Whatever output tax is left after set-off is paid in cash. The simplest entry debits the output ledgers and credits the bank on the date the challan is paid:

Output CGST A/c        Dr
Output SGST A/c        Dr
    To Bank A/c

Strictly, the challan puts money into the electronic cash ledger, and the liability is only discharged when GSTR-3B is filed and the cash is offset. Businesses that deposit ahead of filing, or keep a balance on the portal, record it in two steps: GST Cash Ledger A/c Dr, To Bank on deposit, then Output CGST/SGST A/c Dr, To GST Cash Ledger A/c on filing. The GST cash ledger account then agrees with the portal. Creating and paying the challan is covered in GST challan payment (PMT-06).

A worked month-end example

A trader in one state, all supplies intra-state at 18%, with taxable sales of ₹10,00,000 and taxable purchases of ₹6,00,000 in the month:

The two month-end entries in full:

Output CGST A/c        Dr   54,000
Output SGST A/c        Dr   54,000
    To Input CGST A/c            54,000
    To Input SGST A/c            54,000
(Being input tax credit set off against output tax)

Output CGST A/c        Dr   36,000
Output SGST A/c        Dr   36,000
    To Bank A/c                  72,000
(Being balance GST paid for the month)

If input tax exceeds output tax in a month, the excess stays as a debit balance in the input ledger and is carried forward, matching the balance in the electronic credit ledger. The return side of this is in the GSTR-3B filing guide.

Reverse charge entries

Under reverse charge the recipient, not the supplier, pays the tax. Take a ₹50,000 service at 18%, intra-state, where the credit is available:

Expense A/c            Dr   50,000
Input CGST A/c         Dr    4,500
Input SGST A/c         Dr    4,500
    To Supplier A/c              50,000
    To RCM Output CGST A/c        4,500
    To RCM Output SGST A/c        4,500

RCM Output CGST A/c    Dr    4,500
RCM Output SGST A/c    Dr    4,500
    To Bank A/c                   9,000

Tax payable under reverse charge must be paid in cash; it cannot be discharged with input tax credit. Once paid, the credit is available like any other, subject to the usual conditions. Which supplies fall under reverse charge is covered in reverse charge mechanism.

GST payment in Tally: which head

The most-asked question is which head GST payment goes under in Tally. The answer: create each GST ledger under the Duties & Taxes group, set the type of duty or tax to GST, and set the tax type to Central Tax, State Tax or Integrated Tax. Tally then uses these ledgers in sales and purchase vouchers and in its GST reports.

The payment is recorded as a payment voucher: debit the GST ledgers, credit the bank. Tally offers a statutory payment option in the voucher that pulls the liability for the period and links the payment to the challan details, so the payment shows correctly in its GST reports. The exact screens differ between TallyPrime releases and Tally.ERP 9, so follow the one in front of you rather than a fixed menu path. The set-off can be passed as a journal voucher debiting output ledgers and crediting input ledgers. For checking customer and supplier GSTINs inside Tally, see GST verification in Tally.

Interest, late fee and penalty

Interest on late payment, late fee and penalty are paid through the same challan, but they are not tax and do not belong in the GST ledgers. Book them to separate expense ledgers — for example, interest on GST and late fee on GST returns — and credit the bank or the GST cash ledger account. They are not eligible as input tax credit.

Frequently asked questions