I have published a new post including the GST Functionality on GST Accounting Entries in Tally. That is the updated version. Please go there to learn GST Accounting Entries in Tally.
A TallySchool visitor named Maninder asked me about the role of GST in Tally. I told him that it is an interesting question and therefore I will be publishing a brand new post on it.
So, here is the post exactly explaining how to do GST in Tally.
In other words, I will be explaining how you can calculate GST in Tally and how its accounting can be done in Tally.
But before we start, let me point out a very important fact.
GST is NOT yet implemented in India and therefore you will not find any function of GST in Tally. I have tried to explain how it will work in Tally and how you can use it in Tally.
When it will finally be applicable and the required functionality will be available in Tally, you will be able to use it fully.
I have attempted to use my Creative Powers to calculate GST in Tally before it is made available in Tally. 🙂
So, be with me till the end of this post and you will truly enjoy it.
What is GST – Goods and Services Tax
GST is an acronym for Goods and Services Tax.
It will replace VAT, CST and Service Tax and instead there will be only one tax in the future which will be GST.
For example, currently if I sell a product in Gujarat, I will have to pay VAT (Value Added Tax) and if I sell it out of Gujarat, then I will have to pay CST (Central Sales Tax) because I live in Gujarat.
Likewise, same is also applicable to you too.
The main advantage of GST is a single taxation system.
Currently every state has different VAT and CST acts and rules and people are often confused about the taxation system.
Therefore, when GST will come, it will remove all the confusion about different kinds of taxes, because there will be one and only GST.
There are currently three types of GST:
- CGST – Central GST – Applies to sales within the state – goes to Central Government
- SGST – State GST – Applies to sales within the state – goes to State Government
- IGST – Integrated GST – Applies to sales outside the state – goes to Central Government
For example, if you sell something within the state, 50% of the GST will be CGST and 50% of the GST will be SGST.
But when you sell something outside a state, 100% of it will be IGST which will go to the Central Government.
Now that you have a basic understanding of how GST works, we can go ahead to understand the working of GST in Tally along with its accounting and calculation.
Before you can understand accounting of GST in Tally, you need to understand the calculation of GST in Tally.
Calculation of GST in Tally
As I have stated in the beginning of this post that GST in Tally is not yet available because it is not yet made applicable by the government.
But before you go away, let me tell you one important thing.
Here I am trying to explain you that how GST will work in Tally because the functionality of GST in Tally is almost same as VAT or CST or Service Tax.
And therefore, even with the current functionality you can do accounting entries of GST in Tally.
So, let us get started about the calculation of GST in Tally.
Let’s take an example.
Rohan sells Google Pixel to Amit for ₹57,000 in Gujarat.
Rohan has to collect GST and say it is 18%. Then GST will come at ₹10,260.
As you have read above, if you sell within the state there are two types of GST which will be attracted.
They are CGST and SGST.
In this example, it would be half each. That means 9% CGST and 9% SGST.
It will be ₹5,130 CGST and ₹5,130 SGST.
How the governments will deal with this is none of our business. We just have to be sure about how much taxes we have to pay.
Yes, GST is that simple.
I have explained this same example down in the post in Tally. But I want you first understand the calculation so it will be very easy for you to learn it in Tally.
It is similar to current calculation of Service Tax, VAT and CST. We put the amount of the product and then calculate taxes on it.
For example, if I currently provide a service of ₹10,000 then service tax would be 15% which comes to ₹1500.
The point I am trying to put here is that GST has no doubt made the calculation of taxation and the whole system of taxation easy, but it is still calculated in the same old way.
And therefore, we can prepare ourselves by understanding it and knowing the calculations even before GST gets implemented.
Coming back to the example, even if Rohan had sold the product to Amit from Gujarat to Uttar Pradesh and not in Gujarat, the GST calculation will be the same.
The rate may change or the return filing may get changed but the calculation will be the same.
And this time, it will be 100% IGST.
This is how you can calculate GST in Tally or on your calculator.
Now we will jump off to the Accounting of GST in Tally.
Accounting of GST in Tally
Well, if you know basic accounting entries in Tally, it will be very much easy for you to understand the accounting of GST in Tally.
As I have said before in this post that the calculation part of the GST will remain same as previous taxes which it will replace and therefore accounting will also be almost similar.
So, let us take the above example and try to understand the accounting of GST in Tally.
In the above example, Rohan sold Google Pixel to Amit for ₹57,000.
The accounting entry for the Rohan in his books will be as under. Rohan is the seller here.
Cash or Amit’s A/c Dr 57,000
To Sales A/c 57,000
This was a simple entry without GST. Now with GST of ₹10,260 at the rate of 18% the entry will be as follows.
Cash A/c Dr 67,260
To Sales A/c 57,000
To CGST A/c 5,130
To SGST A/c 5,130
The above was a simple calculation of GST.
The ledger of CGST and SGST can be created under Duties and Taxes same as we create ledgers for all the current taxes.
Here is how you can create the GST – Goods and Services ledgers in Tally.
- From Gateway of Tally, go to Accounts Info.
- Then select Ledgers.
- Now select Create under Single Ledger.
- Now Type CGST and select Duties and Ledgers from List of Groups.
- In Type of Duties/Taxes, select others.
- Select 9% in Percentage of Calculation.
- Select Method of Calculation On Total Sales.
- Select Normal Rounding in the Rounding Method.
- And, lastly select the Rounding Limit to 0.
Here is what it looks like when I am creating CGST ledger in Tally.
Now, repeat the same process for SGST ledger as well as IGST ledger and for IGST ledger set the percentage to 18%.
This is how the IGST ledger will look like in Tally.
For your ease, I have created the entry in Tally for the above calculation so you can have a clear cut understanding of how it will be done in Tally.
It is a simple Sales entry along with the calculation and addition of GST.
From the above picture you can easily see that we have sold Google Pixel to Amit for ₹57,000 and GST of ₹10,260 which is divided in two different parts namely CGST and SGST.
It is a simple sales entry but with GST.
Now if we assume we sold the Google Pixel to Amit who is from a different state which is Uttar Pradesh, the accounting entry in Tally for the same will be almost similar to above.
The only change it will have is of IGST – Integrated Goods and Services Tax because of interstate transaction.
Let me show you how that will appear in Tally if you try to pass the sales entry.
It is exactly the same except for IGST.
The amounts that I have entered in CGST, SGST and IGST will appear in the Balance Sheet on the Liabilities side because we have to pay that to the Government.
And therefore, it is our liability. It amuses me because the accounting is same as current taxation system.
So currently if you create a ledger as I have told above and pass the entry, you can do the accounting of GST in Tally.
Isn’t it amazing that without any kind of add-on and before even the commencement of GST in India, you can do the accounting of GST in Tally.
This is because whatever you require for the accounting of GST in Tally is already present in Tally except for one thing.
That is Returns and Reporting.
The functionality in Tally is not available and therefore Returns and Reporting functionalities are not available in Tally which is currently available for Service Tax, VAT and other taxes in Tally.
But still I love Tally so much. It is amazing. It works universally.
At the End…
Please remember that GST is not yet applicable in India and therefore there are no new features of GST which are added in Tally.
But I have tried to use the current available features of Tally to calculate GST in Tally.
The rates of 9% and 18% are the current rates as per the GST bill. It may change in future.
As far as I think, I have done it correctly and if you find any mistakes, comment below and I will look into it.
This post is a great opportunity to learn the accounting and calculation of GST in Tally before GST becomes applicable and to be prepared.
Be prepared before everyone and get the most out of this opportunity.
Whenever a new thing comes – in our case it is new taxation system called GST, it is an opportunity for young people because they are more willing to learn new things in comparison to aged people.
This post is dedicated to all the young aspiring accountants and chartered accountants who want to make a mark and start their careers.
You can create or find almost anything if you really want to.
That is the reason I was able to create this post using the same old Tally but explaining a whole new tax.
And lastly, I want to thank Maninder once again about asking the question. Thanks, Maninder. This post would not have been possible without him.
If you liked the post and the idea behind it, please share this post.
It will help me and it will help your friends too.
P.S. – Have a look at how to Upgrade Tally.ERP 9 for New GST Ready Version 6.0.