Question

Many businesses that are registered for the goods and services tax use two different general ledger accounts to record the .Explain the purpose of each of the two different accounts and also explain what is done with these accounts at the end of each get reporting period.

Answer 1

Answer

All the taxpayers who were registered under goods and services tax will have the following three ledgers to record the gst which will be created automatically at the time of registration and maintained electronically

1. Electronic Cash ledger

2.Electronic Credit ledger

3. Electronic Liability ledger

Usually many businesses that are registered for the goods and services tax use Electronic Cash ledger and Electronic credit ledger to record the GST. They need to maintain these ledgers in the books of accounts to reconcile and statutory purpose.

1. Electronic Cash ledger

This ledger will serve as an wallet for the registered taxpayer.Taxpayers generally use this ledger for deposit of cash into the GST and for payment of tax. There are three categories of tax 1. IGST (Integrated goods and services tax) 2. CGST (Central goods and services tax) 3. SGST (State goods and services tax). Taxpayer have to deposit cash in respective tax category inorder to pay the tax liability. The cash ledger balance in one tax category shall not be allowed to pay tax liability of other tax category, hence taxpayers should deposit cash in tax category for which they have tax liability. All the interest and late fee charges under goods and services tax shall be allowed in cash payment only, hence taxpayers have to deposit cash in respective late fee or interest columns for the purpose of the payment.

2. Electronic Credit ledger

The Input tax credit on purchases will be credited to this ledger every month under three categories 1. IGST (Integrated goods and services tax) 2. CGST (Central goods and services tax) 3. SGST (State goods and services tax). The taxpayers will be allowed to utilize balance in this credit ledger for payment outward tax libility only, but not for payment of late fee or interest. The net tax liability will be calculated by decucting the electronic credit ledger balance from the outward tax liability.  The electronic credit ledger balace allow taxpayers to pay tax for different tax category, Taxpayers will be able to get refund the balance in electronic credit ledger provided with certain rules and condition under Goods and Services Tax Act.

Electronic Liability ledger will show the net tax liability for the tax period after decuting Input tax credit from the total outward tax liability. This ledger will be auto populated under goods and services tax.