The Accounting Changes You Need To Make To Manage Your GST Records

GST or Goods and Services Tax has revolutionised the way businesses are conducted, and accounting is perceived. Although GST indeed makes life easier, not knowing the right stuff can do more harm than good.

This article simplifies accounting under the GST regime and provides you with a thorough and comprehensive guide to the changes you have to make to manage the records properly.

Registering Your Business 

The process of GST starts with online GST registration. All individuals and businesses with an aggregate sale of goods or services worth INR 20 lakhs or more need GST registration. However, for special category States, the amount is INR 10 lakhs.

Difference Between the Previous Accounting Regime and the New Regime

In the previous regime, all businesses maintained separate accounting ledgers for Central and State taxes, in addition to ledgers like sales, purchase, or stock.

The common accounts that all businesses were required to maintain include Excise payable, Output and Input VAT, CENVAT credit, Input, and Output Service tax, and Central Sales Tax.

As GST subsumed all taxes into one umbrella, you now have to maintain various GST accounts,  in addition to the stock, purchase, and sales registers. The accounts you need to maintain in the new regime are the following:

Input and Output CGST, SGST, and IGST, and e-Cash Ledger on the GST portal

The Major Accounting Changes You Need to Make to Manage GST Records

Any new concept seems difficult to grasp at first, and GST is no exception. Following the ‘in-a-nutshell’ guideline mentioned below will help you to understand the things you have to follow to keep your GST records in order.

1. Tax Rates

You have to classify your goods and services according to five different tax rates – 0%, 5%, 12%, 18%, and 28%.

2. Invoice Format

To supply goods or services to a GST-registered person or business, you have to change your invoice format for accommodating the changes. The following changes are the most glaring:

1. Serial numbers must be consecutive and unique for every financial year.
2. In case you supply goods or services worth INR 50,000 or more to a GST-unregistered person or business, you have to mention the State Name and Code on the invoice.
3. The taxable amount is the amount that is on paper after all applicable discounts.
4. The invoice must contain HSN Code (for goods) or Accounting Code (for services).
5. Invoice Time-Limit

If you are a service provider, you have to raise an invoice within thirty days of providing the service. If, however, you are a goods-provider, then you must prepare the invoice as soon as the goods leave your premises.

4. Book-Keeping

According to GST regulations, you need to maintain the following books at your business-place:

1. Goods manufactured
2. Inbound and outbound goods supply
3. Stock register
4. Input Tax Credit File
5. Output Tax Paid and Payable
6. Auditing Requirements

If your business exceeds an annual turnover of INR 1 crore, you have to rope in a Chartered Accountant or Cost Accountant to audit your accounts. You have to attach the audit report with the GST returns during filing.

6. Interstate and Intrastate Tax Treatment

The tax treatment of interstate goods or services is different from the tax rate of interstate goods or services’ sales or purchases. As a rule, you must keep separate records for CGST, SGST, and IGST.

7. Inventory Valuation

Under GST, you cannot add the refundable taxes to your total cost of goods or services. Hence, you have to consider it to be a part of your assets and not expenses.

Maintaining the Electronic Ledger

When you register for paying GST, you will automatically get the following three ledgers:

1. Cash Ledger

The cash ledger is used to store your money and pay to the Government. It maintains a record of the available cash and the payments you have made so far.

2. Credit Ledger

This ledger will contain all details of Input Tax Credits as received by you on account of CGST, SGST, and IGST. You may use the amount for paying taxes but not interest or penalty.

3. Liability Ledger

It shows the amount you owe after all deductions.

How Long Should You Keep the GST Records?

According to the GST Act, you must maintain GST records for 6 years from the date of filing the returns. For example, if you filed GST returns on 31st December 2019, you have to retain the records till 31st December 2025.

What is the Best Way to Manage Your GST Records Properly?

Keeping GST records is an elaborate and specialised task. A lightweight and online GST software can handle it smoothly and perfectly. Compare a few online software and choose the one that is cost-effective, fast, and reliable.