As per GST, all expenses can be categorised into three major categories:
● GST Applicable Expenses
● GST Not Applicable Expenses
● Non-GST Expenses
‘GST Applicable Expense’ detailed configuration
Since GST Applicable Expenses are the most common expenses, we need to understand them in more detail.
For GST Applicable Expenses, the following additional details need to be specified:
● Tax Category
● HSN/SAC Code
● ITC Eligibility - Under this field, the following options appear:
○ Input Goods
○ Input Services
○ Capital Goods
○ None
● Reverse Charge - Following options are available for RCM:
○ Based on Daily Limit
○ Compulsory (Reg. Dealer)
○ Compulsory (Unreg. Dealer)
○ Service Import
○ Not Applicable
These additional details for GST Applicable Expenses must be specified in all existing expense accounts or new expense accounts being created.
Recording ‘GST Applicable Expense’ transactions through Journal/Payment vouchers
Once all expense accounts are configured properly, the next step is to record expense transactions.
GST Applicable Expenses can be booked either through a Registered Supplier or an Unregistered Supplier in the following modes:
1. Registered Supplier with B2B Invoice (Invoice with your Name & GSTIN)
Select GST Nature as ‘Registered Expense (B2B)’ in Journal/Payment voucher. This option is to be selected when expenses incurred are from a registered dealer with your name and GSTIN printed on the invoice.
2. Registered Supplier with B2C Invoice (Invoice without your Name & GSTIN)
Select GST Nature as ‘Tax Paid Expense (B2C)’ in Journal/Payment voucher. This option is to be selected when expenses incurred are from a registered dealer with GST paid invoice, but the invoice is not in your name, i.e. your name and GSTIN is not printed on the invoice.
3. Un-registered Supplier
Select GST Nature as ‘RCM/Unreg. Expense’ in Journal/Payment voucher. This option is to be selected when the expense incurred is from an unregistered dealer, or expense nature is Compulsory RCM, or the expense is Service Import. By choosing this GST nature, this transaction will become liable for RCM. These vouchers are later used to calculate ‘Consolidated RCM Liability’ at day end.
You do not need to calculate/charge RCM in this voucher. RCM calculation and voucher feeding is to be done at day end using the RCM Calculation utility provided in Transactions GST Misc. Utilities menu
4. GST Exempt
Select GST Nature as ‘Exempt Expense’ in Journal/Payment voucher. This option is to be selected when either the expense is fully exempt by nature (like Books & Periodicals), or the expense is taxable, but the current voucher is exempt (like transportation charges less than a specified amount). The expense incurred may be from a Registered or Unregistered dealer.
Recording ‘GST Not Applicable/Non-GST Expense’ transactions through Journal/Payment vouchers
Select GST Nature as ‘Not Applicable/Non-GST’ in Journal/Payment voucher for expenses whose GST Type is set as ‘GST Not Applicable’ or ‘Non-GST’ in Account master.
Recording expense transactions through Purchase voucher
You can also book expenses using a Purchase voucher. To book expenses through a Purchase voucher, you first need to create an Item for the goods or services being purchased. In the Item master, enter all necessary details and tag the purchase account with the relevant expense account. Once the Item master has been created, you can enter the Purchase voucher.
If the purchase is made from an Unregistered dealer, then select L/GST-Unreg (RCM) option in Purchase Type. But if the purchase is made through a Registered dealer, then select normal Purchase Type such as L/GST-18%, L/GST-28% and so on.
To conclude, If all the expense accounts are configured properly, and transactions are recorded in the manner specified above, they will be reflected properly in GST reports/returns.
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