GST Composition Dealer Accounting Entries in Tally – Sales & Purchases

GST Composition Scheme Accounting Entries in Tally - Sales & Purchases

Today, we are going to see that if you are a GST composition dealer, how you can pass accounting entries in tally for that including sales and purchases transactions in tally.

As a composition dealer, you have to normally pay GST tax when you purchase something but when you sell anything, you cannot collect taxes from the person purchasing goods or services from you.

This post can also be useful if you are just starting up a business.

For example, if you purchase a mobile of ₹10,000 on which 18% GST is applicable, then you have to pay ₹1,800 as GST along with the purchase price.

But, when you, as a composition dealer, sell your goods or services of ₹10,000 to someone, you cannot collect GST.

In fact, you have to pay 1% of ₹10,000 = ₹100 as GST.

Therefore, GST for composition dealers is an expense because they cannot take credit for that.

Now, let us move on to see how you can pass sales and purchase entries as a GST composition dealer in tally.

What you will learn in this post

  • How to create GST Composition Company in Tally
  • Composition Dealer Sales Entry in Tally
  • Printing the Bill of Supply in Tally for Composition Sales
  • Composition Dealer Purchase Entry in Tally
  • How to Create CGST and SGST ledgers in Tally under Composition Scheme

How to create GST Composition Company in Tally ERP 9

If you know how to create a company in tally, it is very easy for you to create a composition company in tally as well.

It is just a matter of how you configure GST details in tally.

So, once you have created a company in tally, you need to go and configure GST as a composition dealer.

  • From Gateway of Tally, go to Features by pressing F11 which is a shortcut in tally for Company Features.
  • Then, go to Statutory & Taxation.
  • Select YES for Enable GST and Set/Alter GST Details options. Press Enter.
  • In the State – select your state. I am selecting Gujarat as it my state.
  • In Registration Type – select Composition.
Configure GST Details in Tally as a Composition Dealer
Configure GST Details in Tally as a Composition Dealer
  • Select No in the option Assessee of Other Territory.
  • Now, in the option Tax rate for taxable turnover – select 1%.
  • Rest all the details are already pre-filled and same. You do not need to change anything.
  • Press Enter and save the details.

Again, you will be in the Company Operations Alteration screen, press CTRL + A to accept the details that we have put in and save it.

Company Operations Alterations Screen in Tally
Company Operations Alterations Screen in Tally

Congratulations! You have successfully created a composition company in tally. In fact, you have enabled GST for Composition Dealers in tally.

Now, let us move forward and see how you can pass a composition sales entry in tally.

How to Pass Composition Dealer Sales Entry in Tally ERP 9

Passing a composition dealer sales entry in tally is 95% same as passing regular dealer GST accounting entries in tally – with sales and purchases.

5% difference is because as a composition dealer, we cannot collect GST from our customers in both B2B (Business to Business) and B2C (Business to Consumer) transactions.

We will take a sale example to see how it practically works.

Example – 1 – Composition Sales Entry

We are selling 10 mobiles for ₹10,000 each so the total value is ₹1,00,000 to Amit a debtor who is in Gujarat. We are in Gujarat as well, so it will be an intra-state transaction.

Composition dealers are not allowed to do inter-state transactions as per the GST Act.

Let us start with the sale entry in tally taking the above example.

  • From Gateway of Tally, go to Accounting Vouchers.
  • Select Sales Voucher.
  • In the Party A/c name – select the Amit to which we are selling mobiles.
  • In the name of item – select Mobile.
  • For Quantity – 10, Rate = ₹10,000, Amount = ₹1,00,000.
  • In Accounting Details, select a Sales Ledger.
  • In GST e-way bill details – enter all the e-way bill details in tally as required.
  • Save the entry by pressing Enter a few times.
GST Composition Dealer Sales Entry in Tally ERP 9
GST Composition Dealer Sales Entry in Tally ERP 9

Congratulations! You have successfully created a sales entry as a composition dealer in tally.

Before we move ahead, I would like to clear a few things regarding ledgers in tally that I have used in the purchase entry.

I have created a Sales Ledger to record the sales with GST configuration.

Amit – Debtor is a ledger that I have created under Sundry Debtor with the GST details.

A stock item in tally named Mobile is created with the GST details like HSN, Rate – 18% and Taxable.

Do you know a sales invoice from a composition dealer cannot be called tax invoice? It is called a bill of supply.

Let’s see why it is called a bill of supply while I show you how to print the sales invoice of a composition dealer from tally.

Side Note – After you have done the complete sales entry with all the correct details, you can see it in the GST Return GSTR – 4 in tally and GST CMP-08 in tally.

It is automatically prepared and I find it one of the best features in tally.

Also, if you pass a composition sales order in tally, it will be exactly the same as the above sales entry except it will be an order and not an invoice.

Printing the Bill of Supply in Tally for Composition Sales

After you have done the above composition sales entry in tally, we can print the invoice so that we can give it to our customer.

It is very easy to print it.

  • Go back to the composition sales entry that we have done.
  • Press ALT + P, while inside the sales entry – which is a shortcut for printing a voucher in tally.

Make sure you have selected – With Preview option so we can see the preview before actually printing it.

Voucher Print Preview Options in Tally ERP 9
Voucher Print Preview Options in Tally ERP 9
  • You can see a preview of the invoice in tally as shown in the picture below.
GST Composition Sales Invoice in Tally ERP 9
GST Composition Sales Invoice in Tally ERP 9

Now, if you see the invoice, you will see 2 different things than the regular GST tax invoice in tally.

  • First is that on the top, it is written Bill of Supply instead of Tax Invoice.
  • Secondly, at the bottom, tax amount is NIL or Zero.

A sales invoice from a composition dealer is called Bill of Supply because a composition taxable person is not eligible to collect taxes on supplies.

In simple words, when you, as a composition dealer sells something, you are not allowed to collect GST on the bill amount.

This is because you are a composition dealer and you are liable to pay only 1% as GST on the total turnover from your own pocket without taking it from the customer.

Therefore, the tax amount is also zero at the bottom of the bill because as I said, a composition dealer cannot collect GST.

So, this is how a GST composition dealer sales invoice is different from a regular GST dealer sales invoice.

Now, we will see what will happen if we, as a composition dealer purchase from a regular GST dealer.

Composition Dealer Purchase Entry in Tally

As a composition dealer under GST, you are liable to pay GST to the regular GST dealer because he has to collect taxes under the GST law from any person who buys from him.

Therefore, even if you are a composition dealer and you cannot collect GST from your customers, you still have to pay GST to the person from whom you are purchasing your goods or services if he is a regular GST dealer.

If he is not a registered GST dealer, the entry will be under GST Reverse Charge in Tally.

Let’s see the GST purchase entry with an example.

Example – 2 – Composition Purchase Entry

You are purchasing 15 mobiles for ₹6,000 + 18% GST from Rohan who is in Gujarat. So, it is the same state transaction and it will involve CGST and SGST.

Now, let us pass the GST purchase entry in Tally.

  • From Gateway of Tally, go to Accounting Vouchers.
  • Select the Purchase Voucher from or press F9 from your keyboard.
  • Enter the Supplier Invoice No.
  • In Party A/c name – select Rohan – Creditor.
  • Under the Name of Item option – select Mobile as the stock item which we already have created.
  • Quantity – 15, Rate – ₹6,000, Amount = ₹90,000.
  • Select a Purchase – 18% as the Purchase Ledger in the Accounting Details window.
Purchase Ledger Selection in Accounting Details Window in Tally
Purchase Ledger Selection in Accounting Details Window in Tally
  • Select CGST and SGST ledgers and the GST will be automatically calculated.
  • Complete the e-way bill details and press Enter a few times to save the entry.
GST Composition Dealer Purchase Entry in Tally ERP 9
GST Composition Dealer Purchase Entry in Tally ERP 9

Congratulations! You have successfully created a GST purchase entry as a composition dealer in tally.

Now, before we move ahead, I would like to highlight a few things about the above purchase entry.

It is a normal GST Invoice in tally with all the tax calculated and you have to pay the GST on it, even if you are a composition dealer.

I have also used a Purchase Ledger which I have configured under GST.

I have created a ledger of Rohan – Creditor under Sundry Creditor with GST configuration.

Have a look at the list of ledger accounts in tally to know what to select under which ledger.

We are using stock item in tally as Mobile, which I have already created before passing the composition sales entry which we have seen above.

After purchasing the mobile, you can see the quantity in stock summary in tally as well.

CGST and SGST ledgers are created in a slightly different way, which I will show you in a minute in this post.

How to Create CGST and SGST ledgers in Tally under Composition Scheme

Under the composition scheme in GST, a composition dealer cannot take credit for the CGST and SGST that he pays while purchasing goods or services.

Therefore, in that sense, all the GST tax that is paid when a composition dealer purchases goods or services from a regular GST dealer is an expense for him just as any other expense like depreciation in tally.

So, in tally, when you create CGST and SGST ledgers for a composition company, it has to be created under Direct Expenses.

For a regular GST dealer, CGST, SGST and IGST ledgers are created under Duties & Taxes in Tally because they can take credit for that. 

You can see here how to create GST taxation ledgers in tally for regular GST Dealers.

Now, let me show you how you can create GST taxation ledgers in tally for a composition dealer.

  • From Gateway of Tally, go to Accounts Info.
  • Then go to Ledgers.
  • Under Single Ledger, select the option Create.
  • For Name – type CGST.
  • It will Under – Direct Expenses.
  • Inventory Values are Affected – No.
  • Type of Ledger – Central Tax for CGST & State Tax for SGST.
Creating CGST Ledger for a Composition Dealer in Tally ERP 9
Creating CGST Ledger for a Composition Dealer in Tally ERP 9
  • Select Yes for the option of – Appropriate Tax Values in Purchase Invoice.
  • Percentage of Calculation will be – 0%.
  • Rounding Method – Not Applicable.
  • Press Enter and save the ledger.

Congratulations! You have successfully created a CGST taxation ledger for composition dealer in tally.

In the exact same way, you can create SGST, UTGST and other GST taxation ledgers in tally for a composition dealer as well.

GST Composition Dealer Accounting Entries in Tally – Video

GST Composition Dealer Accounting Entries in Tally – Free PDF Download

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Conclusion

I am sure as far as GST in tally regarding Composition Scheme is concerned, I have explained it in a very easy and a detailed way.

Also, make sure you have upgraded Tally for GST, otherwise you might not see the composition scheme options.

If you are able to successfully pass the above entries in tally, I can say you know pretty well – how to use tally and what is tally as well.

However, if you still have any doubts, comment down below.
I reply to each and every comment.

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