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Which accounting head does Input Tax on purchases come under and does it automatically net with your output tax ledgers

Does ERPNext automatically calculate sales tax payable, based on your input and output tax, which gets applied at the time of entering sales and purchase invoice. I am able to view both values in GSTR -1 and GSTR -2 . But I want to know if there is a separate account head which automatically nets your output and input tax to show sales tax payable amount. Ideally the account should come in the liabilites side (Output tax- Input tax).

I have framed my GST ledgers in this format. Helping me to understand total gst collected from sales under various rates. But my input tax from purchases do not get netted out in this scenario

No, Erpnext doesn’t have that, IMO no ERP had these feature.
But you can create reconciliation GL and transfer it manually or customized it for auto entry.
Matching with GSTR 3B

Hi,

You can check with your accountant, but usually Input Tax Credit sits in Current Assets>Tax Assets. If you use the same Accounts (Say CGST, SGST & IGST) for both Purchases and Sales, the amount in the Ledger Balance is the net amount.

Most accounts like to pass an accounting entry and net into separate Purchase and Sales GST accounts. But there is no reason why you cannot have the same accounts for both purchases and sales.

Hope this helps.

Thanks

Jay

Hi JayRam, thanks for your reply.
This is what I had thought initially as well. But the ITC on purchase invoices do not appear under tax assets, and the GST amounts I have set is not netted but its is the total of output tax on sales.Although I can view my ITC’s from GSTR-2

Hi Sumit,thanks for your reply.
How do you go about creating a reconciliation ledger for this purpose. Which would automatically calculate the difference?

Hi Ken,

You have to ensure that you pull the same accounts into your Purchase Taxes & Charges template. You will then get the net amount.

Hope this helps.

Thanks

Jay

GST or any other VAT type tax is a payable. It does not belong on P&L. You setup a Group Account - Say Net GST Payable - under which you have 2 sub accounts - GST Collected (on sales) and GST Paid (on Purchases). Each sub account ledger can filtered for the month (to file monthly VAT paid / collected). The group account - NET GST Payable - shows the difference so that is the total to pay. When you actually make the tax payment - you make journal entry to credit bank account and debit GST Payable.