Solved GST Examples Part 2 – CA Foundation Prep

Posted on - 03-02-2025

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Example 1

Reverse Charge Mechanism (RCM) on Freight

M/s ABC hired an unregistered Goods Transport Agency (GTA) to transport goods. The freight charged was ₹10,000. Under GST, freight on GTA (unregistered) is liable under reverse charge mechanism @ 5% IGST (assuming inter-state). ABC pays the freight directly to GTA. Show the journal entry for RCM in ABC’s books.

Solution (Hinglish)

1. Reverse charge ka matlab: recipient (ABC) ko hi GST govt ko dena hoga.

2. Freight = 10,000, IGST @5% = ₹500.

3. ABC will record expense for freight + RCM liability. Then they can claim Input IGST (subject to RCM rules) if the supply is eligible.

Step-by-step

At the time of incurring expense:

Freight Expense Dr. (net + tax? Actually, under RCM, we separate the tax portion as liability to Govt, but eventually we also get input credit on it.)

Entry (simplified approach):

Freight (Expense) A/c Dr. 10,000

Input IGST (under RCM) A/c Dr. 500

To Cash/Bank A/c 10,000

To RCM IGST Payable A/c 500

(Being freight paid under RCM, IGST @5%)

Then, payment of RCM liability to govt:

RCM IGST Payable A/c Dr. 500

To Cash/Bank A/c 500

(Being IGST under RCM paid to Govt)

Because it’s RCM, ABC can claim that ₹500 as Input IGST if it’s allowed (the second line in the first entry shows we recorded “Input IGST (RCM) A/c” also).

Table (one way to see it):

Particulars	Debit (₹)	Credit (₹)
1. Freight Expense A/c	10,000
2. Input IGST (RCM) A/c	500
To Bank A/c (freight paid)		10,000
To RCM IGST Payable A/c		500
(Freight cost + IGST under RCM)
RCM IGST Payable A/c Dr.	500
To Bank A/c (tax paid to Govt)		500
(RCM liability cleared)

Hinglish Explanation:

Yahan freight ek unregistered GTA se liya, toh reverse charge ke tahat ABC ko khud hi tax dena hai.
ABC entry mein freight expense debit, RCM IGST payable credit karti hai. Saath hi hum Input IGST (RCM) bhi create karte hain, jisse hum baad me offset kar sakte hain.
Lastly, RCM liability pay karke hum “RCM IGST Payable A/c” ko settle kar dete hain.

Example 2

Export of Goods (Zero-Rated Supply)

XYZ exports goods worth ₹2,00,000. Under GST, exports are zero-rated. So no output tax is charged to the foreign buyer. Show the journal entry for export sales. Also assume no IGST was charged, and the company can claim input tax refund separately.

Solution (Hinglish)

1. Exports = zero-rated, matlab 0% output tax.

2. If there was input GST on purchase side, the exporter can claim refund or adjust as per rules.

3. Sale entry has no GST portion on output side.

Journal Entry:

Debtor (Foreign Customer) A/c Dr. 2,00,000

To Sales A/c 2,00,000

(Being goods exported at zero-rated GST)

No “Output GST A/c” because export is zero-rated.

Hinglish Explanation:

Export par 0% GST lagta hai, yaani aap output me kuch charge nahi karte.
Company apna input GST refund claim kar sakti hai (but that’s a separate procedure).
Yahan sale entry sirf basic amount ke liye pass hota hai, koi “Output GST” dikhaya nahi jaata.

Example 3

Partial Use of IGST Credit

ABC Co. has output CGST of ₹10,000 and output SGST of ₹10,000 this month. They have input IGST credit of ₹15,000 and no input CGST/SGST credit. Show how they can set off the liabilities if total output liability is ₹20,000 (CGST + SGST) and they only have IGST credit.

Solution (Hinglish)

1. Total output = CGST 10k + SGST 10k = ₹20k.

2. Input IGST = ₹15k.

3. IGST credit sabse pehle hum IGST liability me use karte, but yahan koi IGST output liability hi nahi. Toh ab hum CGST/SGST par use kar sakte hain.

4. For CGST 10k, hum IGST credit me se 10k use kar lete hain. Bach gaya input IGST = 5k.

5. Ab SGST liability 10k bachi, aur humare paas input IGST 5k. Hum 5k use kar sakte hain. Bacha SGST liability 5k hum cash se pay karenge.

Entry (Simplified approach):

Output CGST A/c Dr. 10,000

Output SGST A/c Dr. 10,000

To Input IGST A/c 15,000 (partial usage)

To Bank/Cash A/c 5,000 (rest SGST liability)

(Being adjustment of IGST credit & payment of remainder in cash)

Table:

Liability	Amount	Credit Source	Balance
CGST	10,000	IGST credit (10,000 used)	0
SGST	10,000	IGST credit leftover (5,000)	5,000 cash
Totals	20,000	IGST 15,000 + cash 5,000	0

Hinglish Explanation:

Pura output tax 20k hai, humare paas sirf IGST input 15k hai.
CGST 10k poora pay kiya IGST credit se, fir SGST 10k me se 5k use kiya, baaki 5k cash se bharna pada.
Entry me hum Output CGST & Output SGST ko Dr. karke uska payment dikha dete hain (To Input IGST and To Cash).

Example 4

Goods Purchased with Trade Discount + GST

M/s PQR purchases goods with a list price of ₹1,00,000, subject to 10% trade discount, plus IGST @ 18%. Show the journal entry if payment is made in cash immediately.

Solution (Hinglish)

1. List price 1,00,000 → less 10% T.D. = ₹10,000 → net 90,000.

2. IGST 18% of 90,000 = 16,200.

3. Total = 90,000 + 16,200 = ₹1,06,200.

Journal Entry:

Purchases A/c Dr. 90,000

Input IGST A/c Dr. 16,200

To Cash A/c 1,06,200

(Being goods purchased with 10% T.D. and IGST @18%, paid in cash)

Hinglish Explanation:

Sabse pehle trade discount minus karo, phir GST calculate.
IGST lag raha hai kyunki assume hum inter-state se kharid rahe.
Payment immediate, toh “To Cash A/c” credit hoga.

Example 5:

Capital Goods Purchase with GST

ABC Ltd. purchases a machinery (capital good) for ₹2,00,000 plus CGST 9% and SGST 9%. Payment made via bank. Show the journal entry, assuming the input credit is allowed for capital goods as per rules.

Solution (Hinglish)

1. Machinery cost = 2,00,000.

2. CGST 9% = 18,000, SGST 9% = 18,000.

3. Total = ₹2,36,000.

4. Input tax credit on capital goods is typically claimable if used for business.

Journal Entry:

Machinery A/c Dr. 2,00,000

Input CGST A/c Dr. 18,000

Input SGST A/c Dr. 18,000

To Bank A/c 2,36,000

(Being capital goods purchased with CGST & SGST)

Hinglish Explanation:

Machinery ek capital asset, isliye hum “Machinery A/c” debit karte hain, plus Input CGST & Input SGST.
Payment bank se ho gaya, isliye “To Bank A/c.”
Later on, hum output liability me in input credits ko use kar sakte hain (subject to rules).

Example 6

A firm purchased goods from an inter-state supplier (Invoice ₹1,18,000 including IGST). The basic value of goods is unknown. IGST @ 18%. Find the basic cost and IGST amount, then pass the journal entry.

Solution (Hinglish)

1. Total invoice = 1,18,000 (ye gross figure, jisme cost + 18% IGST included).

2. Let cost = x. Then x + 18% of x = 1,18,000 → x (1 + 0.18) = 1.18x = 1,18,000. x=1,18,000/1.18=₹1,00,000.

3. IGST = 1,18,000 – 1,00,000 = ₹18,000 (or 18% of 1,00,000).

Journal Entry Table:

Date	Particulars	Debit (₹)	Credit (₹)
2025-Oct-10	Purchases A/c Dr.	1,00,000
	Input IGST A/c Dr.	18,000
	To Creditor / Bank		1,18,000
(Being goods purchased inter-state, cost found by dividing total by 1.18)

Hinglish Explanation:

Humne reverse calculation se base cost (1,00,000) nikala. 18% on that is 18,000.
Phir journal entry pass kar di.

Example 7

M/s ABC has Output GST liability of ₹45,000 (CGST+SGST combined) in the current month. They have Input GST Credit of ₹30,000 from previous purchases. They pay the balance in cash. Show the journal entry for utilisation of input credit and payment.

Solution (Hinglish)

1. Output GST liability = 45,000 (assume CGST 22,500 + SGST 22,500 for simplicity).

2. Input GST available = 30,000. So partial set-off:

o Output CGST Dr. 22,500

o Output SGST Dr. 22,500

o To Input GST (part of 30k credit, let’s say we fully use 22,500 for CGST + 7,500 for SGST? Typically you can’t cross-allocate CGST credit to SGST liability. Let’s assume they have enough split credit or a simpler approach: if 15k is Input CGST and 15k is Input SGST, we can do the respective distribution.

For simplicity, let’s do a combined approach (some textbooks just do a single “Input GST” if not differentiating).

Step 1: Adjust output with input:

Particulars	Debit (₹)	Credit (₹)
Output CGST A/c Dr.	22,500
Output SGST A/c Dr.	22,500
To Input CGST A/c	15,000
To Input SGST A/c	15,000
(Utilising input credit total 30,000)

Now total liability was 45,000, we used 30,000 input. Remaining 15,000 to be paid in cash:

Particulars	Debit (₹)	Credit (₹)
Output CGST A/c Dr.	(bal figure)
Output SGST A/c Dr.	(bal figure)
To Bank/Cash A/c	15,000
(Paying remaining in cash)

(Alternatively, you can combine into one entry, but stepwise is clearer.)

Hinglish Explanation:

Humari output liability 45k thi. Input credit 30k tha, usse adjust kar liya. Bacha 15k humne cash se pay kar diya.
Practically CGST credit SGST pe use nahi ho sakta; hum assume kar rahe hain unke input credits me sufficient distribution hogi.

Example 8

ABC Pvt. Ltd. has the following GST credits at the end of a month: Input CGST = ₹5,000, Input SGST = ₹5,000, Input IGST = ₹12,000. Its Output CGST is ₹8,000, Output SGST is ₹8,000, and Output IGST is ₹3,000. Show how credit is utilised step by step and any balance to be paid in cash.

Solution (Hinglish)

Let’s do stepwise:

1. Set off Output IGST first

Output IGST = ₹3,000
We can use Input IGST first. (IGST credit must be used first against IGST liability)
So Input IGST 12,000 → use 3,000.
New Input IGST balance = 12,000 – 3,000 = 9,000.
Output IGST is now 0.

2. Output CGST = ₹8,000

Use leftover Input IGST (9,000) or Input CGST (5,000).
By rule: Input IGST can be used for CGST or SGST after IGST liability is done.
Suppose we first exhaust Input CGST = 5,000. Now CGST liability left = 3,000.
Then use Input IGST (9,000) for remaining 3,000 CGST. Now Input IGST left = 6,000.
Output CGST is now 0.

3. Output SGST = ₹8,000

We have Input SGST = 5,000, leftover Input IGST = 6,000.
First, use Input SGST = 5,000 → SGST liability left = 3,000.
Use leftover Input IGST for that 3,000 → now Input IGST = 6,000 – 3,000 = 3,000 leftover.
Output SGST is 0.

4. Final

All output taxes (CGST, SGST, IGST) are zero.
We still have Input IGST leftover = 3,000, but no more output liability. So no cash needed!

Tabular Summaries

Particular	Amount (₹)	Comments
Input Credits Initially
Input CGST	5,000
Input SGST	5,000
Input IGST	12,000
Output Liabilities
Output CGST	8,000
Output SGST	8,000
Output IGST	3,000
Step 1: Pay Output IGST 3,000 using Input IGST	–3,000	IGST credit left = 9,000
Step 2: Pay Output CGST 8,000	Use Input CGST 5,000 + leftover IGST 3,000 = 8,000	CGST paid fully, leftover IGST now 6,000
Step 3: Pay Output SGST 8,000	Use Input SGST 5,000 + leftover IGST 3,000 = 8,000	leftover IGST = 3,000
Result	–	All output tax = 0, leftover IGST = 3,000

Hinglish Explanation:

IGST credit ko pehle IGST liability me use karte hain. Bacha toh CGST/SGST me laga sakte hain. CGST credit sirf CGST → then IGST, SGST credit sirf SGST → then IGST.
Yahan humne systematically sab set off kiya. Koi cash pay karne ki zaroorat nahi padi because leftover IGST credit was enough.

Example 9

M/s ABC sold goods for ₹60,000 to a buyer in another state, charging IGST @18%. The buyer paid cash. Show the journal entry.

Solution (Hinglish)

1. Inter-state sale ⇒ IGST.

2. IGST 18% of 60,000 = 10,800.

3. Invoice = 60,000 + 10,800 = 70,800.

Journal Entry (Table)

Date	Particulars	Debit (₹)	Credit (₹)
2025-Apr-04	Cash A/c Dr.	70,800
	To Sales A/c		60,000
	To Output IGST A/c		10,800
(Being inter-state sale, IGST @18%, cash received)

Hinglish Explanation:

Dusre state me becha, to IGST credit kiya (10,800), “Sales A/c” 60k credit, aur cash debit 70,800.

Example 10

M/s ABC has Output CGST ₹5,000 + Output SGST ₹5,000. They have Input CGST ₹3,000 + Input SGST ₹2,000 + Input IGST ₹4,000. Show how they can set off the liabilities (assuming no other complications).

Solution (Hinglish)

1. Output total: CGST = 5k, SGST = 5k.

2. Input: CGST = 3k, SGST = 2k, IGST = 4k.

3. CGST 5k → first use Input CGST 3k => leftover CGST liability = 2k, then we can use IGST credit for the 2k => leftover IGST = 2k.

4. SGST 5k → first use Input SGST 2k => leftover SGST liability = 3k, then use leftover IGST 2k => leftover SGST liability = 1k => pay 1k in cash.

Step-by-Step

CGST: 5,000 – 3,000 (Input CGST) = 2,000 (still due), then IGST 4,000 use 2,000 => leftover IGST = 2,000. Now CGST = 0.
SGST: 5,000 – 2,000 (Input SGST) = 3,000 left, use leftover IGST 2,000 => 1,000 left to pay in cash.

Hinglish Explanation:

CGST me pehle input CGST lagate hain. Fir bach gaya to IGST credit use kar sakte hain.
SGST me pehle input SGST lagate hain, fir IGST use karte hain. Jo bach jaye, wo cash se pay karna padta hai.

(No single “journal entry” is strictly needed here, but conceptually that’s how we settle GST liabilities in returns.)

Hinglish Recap

Final Hinglish Recap

1. Intra-state transactions pe CGST + SGST lagta hai; Inter-state pe IGST lagta hai.

2. Purchases pe hum “Input GST” (asset) lete hain; sales pe “Output GST” (liability) record karte hain.

3. GST returns me humne jo input pay kiya hai, use output liability me set off kar sakte hain (subject to rules).

4. Purchase Return me input GST reverse; Sales Return me output GST reverse hota hai.

5. Utilisation of credit me pehle aap apni output type se matching inputs use karte ho (CGST → CGST), phir IGST credit ko CGST/SGST me use kar sakte ho. CGST credit directly SGST ke liye use nahi hota aur vice versa.

6. Reverse Charge me buyer hi GST pay karta hai govt ko, phir input claim kar sakta hai.

7. Exports zero-rated hoti hain, output GST 0% charge hota hai.

8. IGST credit ko pehle IGST liability me adjust karte hain, baaki bache toh CGST/SGST me.

9. Trade Discount ke baad hi GST lagta hai.

10. Capital goods par bhi input credit mil sakta hai, isliye Machinery ke saath Input CGST/SGST accounts use karte hain.

In sab examples se aapko GST ke alag-alag scenarios (reverse charge, export, partial set off, trade discount, capital goods, etc.) samajhne me help milegi!