Home |Goods and Service Tax (GST) | 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?

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, Tax Advocate | Financial Advisor | Virtual CFO

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!

How would you rate the answer?

Excellent Good Neutral Poor Bad

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?

Related Questions