How to Use GST in Tally ERP 9?

Author: Sonia Kapoor

What is GST act 2017?

Since independence, GST is considered to be the biggest tax reform in India. GST fulfills the goal of One Nation One Tax and benefits the consumer, industry and the government by eliminating double taxation. Many indirect taxes in India have been replaced since this indirect tax (GST) was passed in the Parliament on 29th March 2017. However, the GST Act became effective from 1st July, 2017. This multi-stage and comprehensive tax is applicable on every stage of value addition on the supply of goods and services. In other words, GST is imposed at every point of sale.

For states, up to Rs. 20 lakh is exempted from GST and for special category, Rs. 10 lakh is exempted. The tax rate for GST has been divided into four slabs which are 5%, 12%, 18% and 28%. Furthermore, cess is levied on certain commodities such as tobacco products, pan masala, aerated drinks and luxury cars in addition to 28% GST as compensation to the state. According to experts, GST is targeted to bring down the prices of goods and services making them globally competitive.

Types of taxes under GST

There are three types of taxes under GST.

  1. CGST: CGST or Central Goods and Services Tax is applicable for intrastate transactions related to goods and services by the Central Government. It is regulated by the CGST Act. SGST is also imposed on the same intrastate transactions but it is controlled by the state.
  2. SGST/UTGST: As per GST Act, SGST or State Goods and Services Tax is levied by the state government along with CGST on goods and services supplied by a registered person inside the state. Similarly, UTGST is imposed within a Union Territory along with CGST on goods supplied by a registered person.
  3. IGST: Integrated Goods and Services Tax or IGST is levied on goods and services supplied in case of export from India as well as import to India.

How to use Tally ERP 9 with Tally?

  • GST is calculated the same way in Tally as it used to be when tax laws like VAT, service tax and central excise existed. Let’s take an example to understand it better. M/S XYZ of Chennai sells products amounting to Rs. 40,000 to M/S ABZ of Mumbai for which the applicable GST is 18%. The steps are:
  • Calculate GST. In this example, M/S XYZ is supposed to collect Rs. 7200 as GST which 18% from M/S ABZ. Here the taxable amount is Rs. 40,000.
  • Select the Type of Tax. Since this is an interstate transaction, IGST Ledger should be selected and created for making the accounting entry.
  • Select Rate of Tax, 18% IGST.
  • Select Tax Type, Integrated Tax.
  • Create Stock Item Ledger. Once 18% IGST gets selected,
Tally solutions GST will automatically divide the tax rate between CGST and SGST each being 9%.

  • Now create ABZ Inc. ledger taking into account the GSTIN no.
  • Go to Accounting Voucher Screen.
  • Press F8 and enter the above details in Sales Voucher Screen. The tax gets created automatically as per the details provided in Stock Item Creation Window and Tax Ledger Creation window.

This is how Tally.ERP 9 is used to calculate GST.