CA Saurabh Chokhra
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Many Indian companies donot have proper tracking of their credit reversals and re-availments because of not properly accounting the credit reversals and reavailments in the books of accounts.

But in GST since the records of credit will be monitored by GSTN system it becomes utmost necessary for companies to keep a smooth tracking of their input credits in such a way that the credit balances as per Trial balance and GSTN records (electronic credit ledger) matches or in case of differences atleast have proper record of reconciling items causing differences.

Use of separate General ledger (GL) for parking the credits required to be reversed or/ and which can be subsequently re-availed

  • A separate GL could be used to debit/credit the credit reversals /reavailments which will ensure proper tracking of credit reversals/re-availments and will reduce the pain of manual tracking out of books.
  • Further , such GL could also be used to park the input tax credit portion in reverse charge cases on posting of reverse charge invoices in the books. On actual payment of reverse charge the credit of amount debited in this GL can be taken and as such reverse charge credits could also be properly accounted and tracked.

Accounting flow of availing, reversal , re-availment of credit and availing credit of tax paid under reverse charge can be understood in the following manner:

A. On taking credit of input taxes paid in intra-state transaction

Expense A/c Dr.

Telangana CGST availed A/c Dr.

Telanga SGST availed A/c Dr.

To Vendor’s A/c

B. If the invoice remain unpaid after expiry of 180 days from the invoice date:

  • As per Rule 2 of the Input Tax Credit Rules , a registered person, who has availed of input tax credit on any inward supply of goods or services or both, but fails to pay to the supplier thereof the value of such supply along with the tax payable thereon within 180 days from the date of invoice then the details of such credit shall be furnished in Form GSTR-1 of the month immediately following the expiry of 180 days and same shall be added to the output tax liability of the registered person.
  • Such credit required to be reversed could be parked in a separate GL namely “CGST/SGST/IGST Not Availed”.

Telangana CGST Not availed A/c Dr.

Telanga SGST Not availed A/c Dr.

To Telangana CGST availed A/c

To Telanga SGST availed A/c

(Being ITC reversed on payment to vendor after expiry of 180 days from the invoice date)

C. On payment of invoice the credit can be re-availed by passing the following entry:

Telangana CGST availed A/c Dr.

Telangana SGST availed A/c Dr.

To Telangana CGST Not availed A/c

To Telangana SGST Not availed A/c .

(Being ITC re-availed on payment to vendor of the invoice credit of which earlier reversed )

D. Posting of reverse charge invoices:

Exps. A/c Dr. (Import of Service)

IGST Not availed A/c Dr.(with reverse charge tax payable)

To IGST Payable Reverse charge

To Vendor’s A/c

E. On reverse charge payment made to govt.

IGST Payable reverse charge Dr.

To Bank A/c

F. On availing credit of GST paid under reverse charge:

IGST availed A/c Dr.

To IGST Not availed A/c

Advantages of following the above accounting practice:

  • Tracking of credit reversals/re-availments and reverse charge credits as separate General Ledger (GL) is being used to park the credits which are being reversed or to be taken subsequently as re-availment or otherwise .
  • No need to keep manual tracking of credit reversals and their subsequent reavailments.

Challenges:

  • Educating Purchase to Pay (P2P) and tax team to ensure such accounting practice.
  • Performing monthly reconciliation of amount lying in “GST Not Availed” GL.

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