CGST/SGST Input tax Classification in Tally Prime

For the CGST/SGST input tax credit on purchases, it's recommended to classify them under Current Assets, rather than Current Liabilities (Duties and Taxes).

 Here's why: -

Current Liabilities represent amounts owed by your business, whereas Current Assets represent resources owned or controlled by your business. - 

Input tax credit is a benefit that reduces your tax liability, so it's an asset to your business. - 

Classifying input tax credit under Current Assets will help you accurately reflect your business's financial position and ensure compliance with accounting standards. So, to answer your question: - 

Take the CGST/SGST input tax credit on purchases under Current Assets. - Create a separate ledger or account specifically for input tax credit, such as "CGST Input Tax Credit" and "SGST Input Tax Credit" under Current Assets. 

Input CGST/SGST eligible for set-off should generally be classified as a current asset, not a current liability. Output CGST/SGST on sales is a current liability because it is payable to the Government; input tax credit represents a recoverable/set-off balance. You may use separate input CGST and input SGST ledgers under Current Assets, with output tax ledgers under Current Liabilities.

GSTR-2B reflects supplier-reported invoice details; it does not by itself establish that credit is eligible. Record ITC only after checking the applicable eligibility conditions and reconcile it with your books and returns.

This classification also helps keep GST ledger balances and return reconciliations clear during the compliance workflow. Manual invoice checks and reconciliations can be difficult; automation reduces repetitive work while professional judgment remains in control. At Jir AI, our 2,000+ AI agents and 650+ integrations streamline GST, ITR, TDS, TCS and other compliance workflows, helping reduce manual workload by up to 70%. WhatsApp us to explore the workflow for your practice: https://wa.me/message/3HVOZ7HIY4ESC1