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Journal entries for itc

yasaswi gomes (My grammar is 💯 good I)   (6539 Points)

24 June 2021  

1. A registered taxpayer has generated a sales invoice which has Rs. 500 as tax for the final product and collected the same from his final customer. Let us assume he has already paid a tax of Rs. 200 while purchasing the raw material. Now the supplier from whom he may have bought raw material will deposit Rs 200 to the government. Thus, this Rs 200 is the tax paid on the inputs which he can deduct from his liability on the final product. So, the taxpayer needs to pay tax only of Rs. 300 (i.e.Rs. 500 – 200).

2. XYZ company hired a subcontractor to construct a shed for 3,00,000₹. XYZ can claim itc on the work.

Can someone help me with final account journal entries for the above examples please?


 2 Replies

prasad Nilugal (3859 Points)
Replied 24 June 2021

Output tax A/C Dr 500/-
To Input tax A/c. Cr. 200/-
To Tax payable A/c Cr 300/-
( Being Tax payable after adjusting input tax credit )

when you pay the Tax to Govt account
Tax payable. A/c Dr 300
To Bank. A/c. Cr. 300/-
(Payment of tax in Govt account )

2) In 2 query XYZ company can not take input tax credit because , it's Block Credit as per section 17(5) of the CGST act 2017
1 Like

Sourav (Student) (23849 Points)
Replied 25 June 2021

Output tax a/c dr 500
to Input tax a/c 200
to Tax payable a/c 300

Tax payable a/c dr 300
to Bank a/c 300

ITC is not applicable in this case
1 Like

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