GST Journal Entries: Input, Output, CGST, SGST, and IGST

GST journal entries become much easier when you stop seeing GST as one extra amount added at the end of a transaction.

In accountancy, GST has its own direction.

When the business pays GST on eligible purchases, it usually gets a credit. When the business charges GST on sales, it creates a liability. At the end, the business adjusts the credit against the liability and pays only the balance.

That is the heart of the topic.

Let us build the topic slowly, with clear entries and small examples.

First Understand What GST Does in Accounts

GST is an indirect tax. The business may collect it from customers on sales and may also pay it to suppliers on purchases.

But for a registered business, eligible GST paid on purchases is not treated like a normal expense. It is treated as input tax credit.

In simple words:

Situation	What it means for the business
GST paid on eligible purchases	Credit available, so it is recorded as Input GST
GST charged on sales	Amount payable to the government, so it is recorded as Output GST
Output GST is more than Input GST	Balance is paid
Input GST is more than Output GST	Credit may remain available, as per rules and the question

This is why we do not simply add GST to Purchases Account or Sales Account in normal questions where input credit is available.

Purchases and sales are recorded at the taxable value. GST is recorded separately.

CGST, SGST, and IGST in Plain Language

GST is split based on whether the sale or purchase happens within the same state or between different states.

Type of transaction	GST used
Within the same state	CGST and SGST
Between two different states	IGST

CGST means Central Goods and Services Tax.

SGST means State Goods and Services Tax.

IGST means Integrated Goods and Services Tax.

For example, if the GST rate is 18 percent:

Transaction type	Tax split
Same-state transaction	CGST 9 percent and SGST 9 percent
Inter-state transaction	IGST 18 percent

The total tax rate is the same in this example. The difference is the way it is split.

The Accounts You Need for GST Entries

For basic GST journal entries, you will usually use these accounts:

Account	Nature
Input CGST A/c	Asset or credit balance available for set-off
Input SGST A/c	Asset or credit balance available for set-off
Input IGST A/c	Asset or credit balance available for set-off
Output CGST A/c	Liability
Output SGST A/c	Liability
Output IGST A/c	Liability
Electronic Cash Ledger or Bank A/c	Used when tax is paid

Input accounts are debited because the business is getting a credit.

Output accounts are credited because the business has collected tax and owes it.

That is the main debit-credit logic.

Entry for Same-State Purchase With GST

Suppose goods are purchased from a supplier in the same state:

Goods purchased: Rs. 10,000
GST rate: 18 percent
CGST: 9 percent = Rs. 900
SGST: 9 percent = Rs. 900
Invoice total: Rs. 11,800

The journal entry is:

Particulars	Debit	Credit
Purchases A/c Dr.	Rs. 10,000
Input CGST A/c Dr.	Rs. 900
Input SGST A/c Dr.	Rs. 900
To Supplier’s A/c		Rs. 11,800

If the purchase is made in cash or by bank, credit Bank A/c or Cash A/c instead of Supplier’s Account.

Why is Purchases Account debited only by Rs. 10,000?

Because Rs. 10,000 is the value of goods. The GST of Rs. 1,800 is recorded separately as input credit.

Entry for Same-State Sale With GST

Now suppose goods are sold to a customer in the same state:

Goods sold: Rs. 20,000
GST rate: 18 percent
CGST: 9 percent = Rs. 1,800
SGST: 9 percent = Rs. 1,800
Invoice total: Rs. 23,600

The journal entry is:

Particulars	Debit	Credit
Customer’s A/c Dr.	Rs. 23,600
To Sales A/c		Rs. 20,000
To Output CGST A/c		Rs. 1,800
To Output SGST A/c		Rs. 1,800

Sales Account is credited with only the selling value.

Output GST is credited separately because it is a liability. The business has collected that tax from the customer and has to settle it according to GST rules.

Entry for Inter-State Purchase With IGST

If goods are purchased from another state, IGST is used.

Suppose goods are purchased from a supplier in another state:

Goods purchased: Rs. 15,000
IGST rate: 18 percent
IGST: Rs. 2,700
Invoice total: Rs. 17,700

The journal entry is:

Particulars	Debit	Credit
Purchases A/c Dr.	Rs. 15,000
Input IGST A/c Dr.	Rs. 2,700
To Supplier’s A/c		Rs. 17,700

There is no CGST and SGST split here because the transaction is inter-state.

Entry for Inter-State Sale With IGST

Now suppose goods are sold to a customer in another state:

Goods sold: Rs. 25,000
IGST rate: 18 percent
IGST: Rs. 4,500
Invoice total: Rs. 29,500

The journal entry is:

Particulars	Debit	Credit
Customer’s A/c Dr.	Rs. 29,500
To Sales A/c		Rs. 25,000
To Output IGST A/c		Rs. 4,500

Again, Sales Account records only the value of goods sold. Output IGST records the tax liability.

Purchase Return With GST

A purchase return reverses part of a purchase.

Suppose goods worth Rs. 2,000 are returned to a same-state supplier. GST is 18 percent, split as CGST 9 percent and SGST 9 percent.

Purchase return: Rs. 2,000
CGST: Rs. 180
SGST: Rs. 180
Total reduction in supplier balance: Rs. 2,360

The entry is:

Particulars	Debit	Credit
Supplier’s A/c Dr.	Rs. 2,360
To Purchase Returns A/c		Rs. 2,000
To Input CGST A/c		Rs. 180
To Input SGST A/c		Rs. 180

Why are Input CGST and Input SGST credited?

Because the purchase is reduced, so the input tax credit connected with that purchase is also reduced.

For an inter-state purchase return, use Input IGST instead of Input CGST and Input SGST.

Sales Return With GST

A sales return reverses part of a sale.

Suppose a same-state customer returns goods worth Rs. 3,000. GST is 18 percent, split as CGST 9 percent and SGST 9 percent.

Sales return: Rs. 3,000
CGST: Rs. 270
SGST: Rs. 270
Total reduction in customer balance: Rs. 3,540

The entry is:

Particulars	Debit	Credit
Sales Returns A/c Dr.	Rs. 3,000
Output CGST A/c Dr.	Rs. 270
Output SGST A/c Dr.	Rs. 270
To Customer’s A/c		Rs. 3,540

Why are Output GST accounts debited?

Because the sale is reduced, so the output tax liability connected with that sale is also reduced.

For an inter-state sales return, debit Output IGST instead.

Expenses With GST

GST can also appear on expenses.

Suppose office stationery is purchased for business use from a same-state supplier:

Stationery value: Rs. 4,000
CGST: Rs. 360
SGST: Rs. 360
Invoice total: Rs. 4,720

If input credit is available, the entry is:

Particulars	Debit	Credit
Stationery A/c Dr.	Rs. 4,000
Input CGST A/c Dr.	Rs. 360
Input SGST A/c Dr.	Rs. 360
To Bank A/c		Rs. 4,720

The expense is recorded at the taxable value because GST credit is available separately.

But if the question says input credit is not available, the tax becomes part of the cost.

Then the entry would be:

Particulars	Debit	Credit
Stationery A/c Dr.	Rs. 4,720
To Bank A/c		Rs. 4,720

Buying a Fixed Asset With GST

For a business asset, the same idea applies.

Suppose furniture is purchased for office use:

Furniture value: Rs. 30,000
CGST: Rs. 2,700
SGST: Rs. 2,700
Invoice total: Rs. 35,400

If credit is available, the entry is:

Particulars	Debit	Credit
Furniture A/c Dr.	Rs. 30,000
Input CGST A/c Dr.	Rs. 2,700
Input SGST A/c Dr.	Rs. 2,700
To Bank A/c		Rs. 35,400

If credit is not available, Furniture Account may be debited with the full Rs. 35,400.

The question will usually guide you here. Do not overthink it unless the question specifically tests input credit.

Set-Off of Input GST Against Output GST

At the end of the period, the business compares output GST with input GST.

Suppose the balances are:

Account	Amount
Output CGST	Rs. 2,700
Output SGST	Rs. 2,700
Input CGST	Rs. 1,800
Input SGST	Rs. 1,800

Input CGST can be adjusted against Output CGST.

Input SGST can be adjusted against Output SGST.

The set-off entries are:

Particulars	Debit	Credit
Output CGST A/c Dr.	Rs. 1,800
To Input CGST A/c		Rs. 1,800

Particulars	Debit	Credit
Output SGST A/c Dr.	Rs. 1,800
To Input SGST A/c		Rs. 1,800

Now the balance payable is:

Tax	Output	Input adjusted	Payable
CGST	Rs. 2,700	Rs. 1,800	Rs. 900
SGST	Rs. 2,700	Rs. 1,800	Rs. 900
Total	Rs. 5,400	Rs. 3,600	Rs. 1,800

The payment entry is:

Particulars	Debit	Credit
Output CGST A/c Dr.	Rs. 900
Output SGST A/c Dr.	Rs. 900
To Bank A/c		Rs. 1,800

After this, the output GST accounts are closed.

Important GST Set-Off Rules for Basic Questions

For school-level journal entries, these rules are enough in most cases:

Input credit	Can be adjusted against
Input CGST	Output CGST, then Output IGST if allowed by the question
Input SGST	Output SGST, then Output IGST if allowed by the question
Input IGST	Output IGST first, then Output CGST and Output SGST as per rules

The most important restriction is this:

CGST credit cannot be used to pay SGST, and SGST credit cannot be used to pay CGST.

That mistake is very common.

If your question gives a set-off order or a working note format, follow that format.

Full Example: Purchase, Sale, Set-Off, and Payment

Let us combine the topic into one clean example.

A business has these transactions:

1. Purchased goods within the state for Rs. 40,000 plus GST 18 percent.
2. Sold goods within the state for Rs. 70,000 plus GST 18 percent.
3. Paid the balance GST by bank.

Step 1: Purchase Entry

GST on purchase:

CGST = 9 percent of Rs. 40,000 = Rs. 3,600
SGST = 9 percent of Rs. 40,000 = Rs. 3,600
Invoice total = Rs. 47,200

Entry:

Particulars	Debit	Credit
Purchases A/c Dr.	Rs. 40,000
Input CGST A/c Dr.	Rs. 3,600
Input SGST A/c Dr.	Rs. 3,600
To Supplier’s A/c		Rs. 47,200

Step 2: Sale Entry

GST on sale:

CGST = 9 percent of Rs. 70,000 = Rs. 6,300
SGST = 9 percent of Rs. 70,000 = Rs. 6,300
Invoice total = Rs. 82,600

Entry:

Particulars	Debit	Credit
Customer’s A/c Dr.	Rs. 82,600
To Sales A/c		Rs. 70,000
To Output CGST A/c		Rs. 6,300
To Output SGST A/c		Rs. 6,300

Step 3: Set-Off Entry

Input CGST of Rs. 3,600 is adjusted against Output CGST.

Input SGST of Rs. 3,600 is adjusted against Output SGST.

Particulars	Debit	Credit
Output CGST A/c Dr.	Rs. 3,600
To Input CGST A/c		Rs. 3,600

Particulars	Debit	Credit
Output SGST A/c Dr.	Rs. 3,600
To Input SGST A/c		Rs. 3,600

Step 4: Balance Payment

Balance payable:

CGST payable = Rs. 6,300 - Rs. 3,600 = Rs. 2,700
SGST payable = Rs. 6,300 - Rs. 3,600 = Rs. 2,700
Total payable = Rs. 5,400

Payment entry:

Particulars	Debit	Credit
Output CGST A/c Dr.	Rs. 2,700
Output SGST A/c Dr.	Rs. 2,700
To Bank A/c		Rs. 5,400

This is the complete flow:

Purchase created input credit. Sale created output liability. Input credit was used first. The balance was paid.

Common Mistakes Students Make

Mistake	Correct approach
Recording purchase at invoice value even when input credit is available	Record purchase at taxable value and debit Input GST separately
Crediting sales with invoice value	Credit Sales with taxable value and credit Output GST separately
Using CGST and SGST for an inter-state transaction	Use IGST
Using IGST for a same-state transaction	Use CGST and SGST
Forgetting GST in returns	Reduce the related Input GST or Output GST also
Treating Output GST as income	Output GST is a liability
Using Input CGST to pay Output SGST	Do not cross-adjust CGST and SGST
Creating Input GST even when credit is not available	Add GST to the cost when credit is not available

A Simple Method to Solve GST Entries

Use this five-step method whenever you see a GST transaction:

1. Decide whether it is a purchase, sale, return, expense, or asset.
2. Find the taxable value before GST.
3. Decide whether the transaction is same-state or inter-state.
4. Split GST into CGST and SGST, or use IGST.
5. Decide whether GST is input credit or output liability.

Once you do these five steps, the journal entry almost writes itself.

For purchases and eligible expenses, GST usually becomes Input GST.

For sales, GST becomes Output GST.

For returns, reverse the GST that was originally recorded.

For payment, set off input against output and pay the balance.

Quick Recap

GST journal entries are not about memorising many separate formats. They are about understanding one flow.

When the business buys, eligible GST becomes input credit.

When the business sells, GST becomes output liability.

When the period ends, input credit is adjusted against output liability.

When any balance remains, it is paid.

That is why the entries become simple once the direction of tax is clear.

Frequently Asked Questions

What is Input GST in accountancy?

Input GST is GST paid on eligible purchases, expenses, or assets. It is recorded separately because the business may use it as credit against output tax liability.

What is Output GST?

Output GST is GST charged on sales. It is a liability because the business has collected tax from the customer and must settle it according to GST rules.

When do we use CGST and SGST?

Use CGST and SGST when the transaction is within the same state. For example, if the GST rate is 18 percent, it may be split as CGST 9 percent and SGST 9 percent.

When do we use IGST?

Use IGST when the transaction is between different states. In that case, do not split the tax into CGST and SGST.

Is GST included in Purchases Account?

If input credit is available, GST is not included in Purchases Account. Purchases Account is debited with the taxable value, and Input GST is debited separately.

Is GST included in Sales Account?

No. Sales Account is credited with the selling value before GST. Output GST is credited separately.

What happens to GST on purchase return?

Purchase return reduces both the purchase value and the input tax credit. So Purchase Returns Account is credited, and the related Input GST account is also credited.

What happens to GST on sales return?

Sales return reduces both the sale value and the output tax liability. So Sales Returns Account is debited, and the related Output GST account is also debited.

Can Input CGST be used to pay Output SGST?

No. Input CGST cannot be used to pay Output SGST. Similarly, Input SGST cannot be used to pay Output CGST.

What if input credit is not available?

If input credit is not available, do not create an Input GST account. Add the GST to the cost of the expense or asset, as the question requires.