While preparing a profit and loss account, will sales and purchases include GST or not? Can we claim GST in income tax returns as an expense?
![Shyamal Modi](/assets/avatars/1634551020_04a1a3245f9b34847889.png)
Answered on December 06,2022
Lets go to the basics!
What shall be the journal entry of taxable sales?
Sale of Rs. 100000 + 18% GST
Cash/Bank/Party A/c Dr. 118000
To Sales A/c Cr. 100000
To Output CGST A/c Cr. 9000
To Output SGST A/c Cr. 9000
So what amount goes to the Sales Account? 1 Lakhs or 1.18 Lakhs?
Sales account will always reflect the taxable value of goods/services (i.e. without GST/VAT). The Same goes with purchases!
Second Question:
How will you group GST payable? Will it come under P&L or Balance Sheet?
GST payable or receivable is a balance sheet item, to be shown under liabilities as duties & taxes.
Only if GST is payable under RCM, or if ITC cannot be claimed, we can show the GST paid on purchase as an expense in P&L.
GST paid as RCM can be allowed as business expenditure, but if ITC is not claimed or reversed by the reason being a personal expenditure, then the same shall not be allowed as business expense!