Lecture on GST (Goods and Services Tax)

Introduction

• Welcome and appreciation for support.
• Discussing an important chapter: GST (Goods and Services Tax).
• Clarifying common misconceptions about GST.
• Assuring that the chapter will be explained thoroughly.

What is GST?

• GST stands for Goods and Services Tax.
• A tax imposed on goods and services.

Understanding Tax

• Definition: A compulsory payment to the government without expecting any direct benefit in return.
• The government uses tax money for public benefits (schools, hospitals, infrastructure, etc.).
• Types of Taxes:
  • Direct Tax: Applied on income and property (e.g., income tax, wealth tax).
  • Indirect Tax: Applied on goods and services (e.g., GST).

Pre-GST Taxes

• Before GST: sales tax, service tax, value added tax (VAT), etc.
• Post-GST: All these replaced by GST.
• Motto: One Nation, One Tax.
• Effective Date: 1st July 2017.

Burden of Tax

• Direct Tax: Paid directly by the taxpayer (e.g., income tax).
• Indirect Tax: Tax burden is shifted to the customer (e.g., GST on cinema tickets, services, etc.).

Types of GST

• CGST: Central Goods and Services Tax, collected by the central government.
• SGST: State Goods and Services Tax, collected by the state government.
• IGST: Integrated Goods and Services Tax, collected for interstate transactions and goes to the central government.

Applicability

• Same State Transaction: CGST + SGST.
• Different State Transaction: IGST.

GST Rates

• 0%: Essentials.
• 5%: Common use items.
• 12%: Standard rate with no specific category.
• 18%: Standard for goods and all services.
• 28%: Luxury items.
• CGST + SGST: Divides state GST into half.

Accounting for GST

General Entries

• Purchase of Goods (Cash/Credit):
  • `Purchases A/C Dr.
  • Input CGST Dr.
  • Input SGST Dr.
  • To Cash/Creditor A/C.`
• Purchase of Assets:
  • `Asset A/C Dr.
  • Input CGST Dr.
  • Input SGST Dr.
  • To Cash/Creditor A/C.`
• Sale of Assets:
  • `Cash/Debtor A/C Dr.
  • To Asset A/C.
  • To Output CGST.
  • To Output SGST.`
• Sale of Goods:
  • `Cash/Debtor A/C Dr.
  • To Sales A/C.
  • To Output CGST.
  • To Output SGST.`
• Expenses:
  • `Expense A/C Dr.
  • Input CGST Dr.
  • Input SGST Dr.
  • To Cash/Bank.`
• Incomes:
  • `Cash/Bank A/C Dr.
  • To Income A/C.
  • To Output CGST.
  • To Output SGST.`

Special Cases

• Abnormal Losses: Input GST to be written off
  • `Abnormal Loss A/C Dr.
  • To Purchases A/C.
  • To Input CGST.
  • To Input SGST.`
• Drawings: GST benefit not available
  • `Drawings A/C Dr.
  • To Purchases A/C.
  • To Input CGST.
  • To Input SGST.`
• Final Settlement:
  • Settling Output GST with Input GST and paying the balance:
    • `Output CGST Dr.
    • To Input CGST.
    • To Bank.`
    • `Output SGST Dr.
    • To Input SGST.
    • To Bank.`

Summary

• Detailed understanding of GST, its types, and accounting treatment.
• Practical examples and accounting entries.
• Special cases and final settlement process.
• Emphasis on note-making and thorough review for mastery.

Next Steps: Solving GST questions for better understanding.

Action Items: Review the lecture, make notes, and get ready for the next class.