GTA Accounting Entry Under GST RCM

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Roshan

Roshan (Querist)
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24 July 2017 Please suggest How to Make Account Entry of GTA under GST

Roshan

Roshan (Querist)
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25 July 2017 Please suggest

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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27 July 2024 Under GST, accounting for Goods Transport Agency (GTA) services, especially when dealing with Reverse Charge Mechanism (RCM), involves several key steps. Here’s a detailed guide on how to make accounting entries for GTA under GST:

### **1. Understanding the Scenario**

When a business receives GTA services and is liable to pay GST under RCM, the following key points are relevant:

- **Reverse Charge Mechanism (RCM)**: The recipient of the service (the business) is responsible for paying GST directly to the government, instead of the supplier.
- **Input Tax Credit (ITC)**: The GST paid under RCM can generally be claimed as Input Tax Credit, subject to compliance with GST rules.

### **2. Accounting Entries for GTA under RCM**

#### **A. **Receiving GTA Services**

When you receive services from a GTA, the typical accounting entries under RCM are:

1. **Invoice from GTA**:
- **GTA Invoice**: The invoice from the GTA may not include GST, as it is under RCM.

2. **Accounting Entry for RCM**:
- **Recording the Expense**:
- **Debit**: Expense Account (e.g., Freight Expense)
- **Credit**: Accounts Payable or Supplier’s Account

Example Entry:
```plaintext
Debit: Freight Expense Account ₹10,000
Credit: Accounts Payable (GTA) ₹10,000
```

- **Recording GST under RCM**:
- **Debit**: Input Tax Credit (ITC) Account (CGST and SGST or IGST)
- **Credit**: GST Payable Account (CGST and SGST or IGST)

Example Entry:
```plaintext
Debit: Input Tax Credit (CGST) ₹500
Debit: Input Tax Credit (SGST) ₹500
Credit: GST Payable (CGST) ₹500
Credit: GST Payable (SGST) ₹500
```

#### **B. **Payment of GST under RCM**

When you pay the GST under RCM to the government:

1. **Payment Entry**:
- **Debit**: GST Payable Account (CGST and SGST or IGST)
- **Credit**: Bank Account

Example Entry:
```plaintext
Debit: GST Payable (CGST) ₹500
Debit: GST Payable (SGST) ₹500
Credit: Bank Account ₹1,000
```

#### **C. **Claiming Input Tax Credit**

When you claim ITC for the GST paid under RCM:

1. **ITC Claim**:
- **Debit**: Input Tax Credit Account (CGST and SGST or IGST)
- **Credit**: GST Payable Account (CGST and SGST or IGST)

Example Entry:
```plaintext
Debit: Input Tax Credit (CGST) ₹500
Debit: Input Tax Credit (SGST) ₹500
Credit: GST Payable (CGST) ₹500
Credit: GST Payable (SGST) ₹500
```

### **3. **Example Scenario**

Let’s assume you receive GTA services worth ₹10,000. The applicable GST under RCM is 5% CGST and 5% SGST.

**Invoice from GTA**:
- Freight Charges: ₹10,000
- GST under RCM: ₹500 CGST + ₹500 SGST

#### **A. **Recording the Invoice**

1. **Freight Expense Entry**:
```plaintext
Debit: Freight Expense ₹10,000
Credit: Accounts Payable (GTA) ₹10,000
```

2. **GST Entry**:
```plaintext
Debit: Input Tax Credit (CGST) ₹500
Debit: Input Tax Credit (SGST) ₹500
Credit: GST Payable (CGST) ₹500
Credit: GST Payable (SGST) ₹500
```

#### **B. **Payment of GST**

1. **GST Payment Entry**:
```plaintext
Debit: GST Payable (CGST) ₹500
Debit: GST Payable (SGST) ₹500
Credit: Bank Account ₹1,000
```

#### **C. **ITC Claim**

1. **Claiming ITC**:
```plaintext
Debit: Input Tax Credit (CGST) ₹500
Debit: Input Tax Credit (SGST) ₹500
Credit: GST Payable (CGST) ₹500
Credit: GST Payable (SGST) ₹500
```

### **4. **Practical Tips**

- **Ensure Documentation**: Maintain proper documentation including invoices from the GTA and records of GST payment.
- **Reconcile GST**: Regularly reconcile GST payable and ITC accounts to ensure accuracy.
- **Consult Professionals**: For complex scenarios or specific tax queries, consult with a GST professional or tax consultant to ensure compliance.

These entries will help ensure that your accounting for GTA services under RCM is accurate and compliant with GST regulations.

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