AccountancyCBSE Class 11 · Recording of Transactions - I

GST in Journal Entries Class 11: Input Tax, Output Tax and Set-off Rules

Updated 17 October 2026 · Fact-checked

On a purchase the buyer debits Input CGST, Input SGST (or Input IGST) in addition to Purchases; on a sale the seller credits Output CGST, Output SGST (or Output IGST) in addition to Sales. At the end of the period the input credit is set off against the output tax in the prescribed order, and the balance of output tax is payable to the government (or an input credit is carried forward).

Input IGST can pay any output tax; input CGST or SGST pays its own output tax or IGST, but CGST and SGST are never set off against each other.

Illustration drawn for QuestionBuddy.

Understand GST in Journal Entries: Input Tax, Output Tax and Set-off

Intra-state and inter-state.

Within the state (intra-state): GST is split into CGST (central) and SGST/UTGST (state) at half the rate each. A rate of 18% means CGST 9% and SGST 9%.
Between states (inter-state): the whole rate is charged as IGST (18% as IGST).

Entries in the buyer's books.
Purchases A/c Dr; Input CGST A/c Dr; Input SGST A/c Dr; To Supplier A/c (or Cash). The input accounts are assets (credit available).

Entries in the seller's books.
Customer A/c (or Cash) Dr; To Sales A/c; To Output CGST A/c; To Output SGST A/c. The output accounts are liabilities (tax collected for the government).

Set-off rules (order of credit).

Input IGST is first used against output IGST, then against output CGST, and then against output SGST.
Input CGST is used against output CGST, then output IGST (never against SGST).
Input SGST is used against output SGST, then output IGST (never against CGST).

Closing the accounts. After set-off, entries transfer the input accounts to the output accounts (Output CGST Dr to Input CGST Cr, etc.); the remaining output balance is GST payable, paid by the due date (Dr Output GST, Cr Cash/Bank). A debit balance of input GST is carried forward as credit.

Other points. GST is charged on the value after trade discount. Goods returned reverse the tax: Sales Return and Output tax debit in the seller's books.

GST in Journal Entries: Input Tax, Output Tax and Set-off: key facts

Intra-state split: CGST = half of GST rate
SGST = half of GST rate
Both on taxable value; 18% = 9% + 9%.
Inter-state: IGST = full GST rate | No CGST or SGST; Treated as one tax.
Set-off order: IGST credit IGST, then CGST, then SGST
CGST credit CGST, then IGST
SGST credit SGST, then IGST; CGST never against SGST.
GST payable: Output tax − Input tax credit; If negative, credit carried forward.

IGST credit	IGST, then CGST, then SGST
CGST credit	CGST, then IGST
SGST credit	SGST, then IGST

How to answer GST in Journal Entries: Input Tax, Output Tax and Set-off questions

GST journal questions follow a fixed pattern; the tax accounts depend on place of supply.

1Compute the taxable value: list price less trade discount.
2Decide intra-state (split) or inter-state (IGST).
3Calculate each tax on the taxable value.
4Buyer: debit Purchases and Input taxes; credit the supplier. Seller: debit the customer; credit Sales and Output taxes.
5For the end-of-period statement: set off in the prescribed order and find the net payable.

GST in Journal Entries: Input Tax, Output Tax and Set-off in real life

The idea, met in an everyday situation. Answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

One purchase, one sale

Suppose Hari, a wholesaler in the same state, buys goods of ₹50,000 at 12% GST and sells them for ₹70,000 at 12% GST.

Find the net GST he pays.

Try it first, then show the solutionSolution

Input tax = 12% of 50,000 = ₹6,000 (CGST 3,000, SGST 3,000).
Output tax = 12% of 70,000 = ₹8,400 (CGST 4,200, SGST 4,200).
Net payable = 8,400 − 6,000 = ₹2,400 (CGST 1,200, SGST 1,200).

Answer: GST payable ₹2,400.

Memory hook: Pay only on the value you add.

Tricks to remember GST in Journal Entries: Input Tax, Output Tax and Set-off

Short memory aids. Say each one aloud once, then use it on a question the same day.

IGST is the flexible one
IGST credit can be used against any output; CGST and SGST never against each other.
Use it when: Set-off.
Input is an asset, output is a liability
Input credit is something you can use; output tax you owe.
Use it when: Nature of accounts.

GST in Journal Entries: Input Tax, Output Tax and Set-off: solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: Intra-state or inter-state? · 1 mark · MCQBoard level

Goods sold by a firm in Pune to a buyer in Surat attract:
(a) CGST and SGST
(b) IGST
(c) only CGST
(d) no tax

Try it first, then show the solutionSolution

Pune and Surat are in different states, so inter-state.
The whole GST is charged as IGST.

Answer: (b) IGST

Example 2: Purchase entry · 3 marks · Short answerBoard level

Pass the journal entry in the books of the buyer: goods of ₹40,000 purchased from Kiran in the same state at 18% GST on credit. (3 marks)

Try it first, then show the solutionSolution

CGST = SGST = 9% of 40,000 = ₹3,600 each.
Purchases A/c Dr 40,000; Input CGST A/c Dr 3,600; Input SGST A/c Dr 3,600; To Kiran A/c 47,200.

Answer: Dr Purchases 40,000, Input CGST 3,600, Input SGST 3,600; Cr Kiran 47,200.

Example 3: Sale with trade discount · 4 marks · Short answerHarder board level

Goods listed at ₹80,000 are sold to Lata at a trade discount of 10% in the same state, GST 12%, on credit. Pass the entry in the seller's books. (4 marks)

Try it first, then show the solutionSolution

Taxable value = 80,000 − 8,000 = ₹72,000.
GST = 12% of 72,000 = 8,640: CGST 4,320; SGST 4,320.
Lata Dr 80,640; To Sales 72,000; To Output CGST 4,320; To Output SGST 4,320.

Answer: Dr Lata 80,640; Cr Sales 72,000, Output CGST 4,320, Output SGST 4,320.

Example 4: Set-off in the order of credit · 5 marks · Short answerHarder board level

A firm has Input CGST ₹9,000, Input SGST ₹7,000, Input IGST ₹12,000 and Output CGST ₹15,000, Output SGST ₹10,000, Output IGST ₹5,000. Apply the set-off in the order of credit and find the GST payable under each head and in total. (5 marks)

Try it first, then show the solutionSolution

Input IGST 12,000: first against Output IGST 5,000 (remaining input IGST 7,000).
The 7,000 is used against Output CGST 15,000 (remaining output CGST 8,000).
Input CGST 9,000 against output CGST 8,000: output CGST nil; remaining input CGST 1,000, which can be used against output IGST, now nil, so 1,000 is carried forward.
Input SGST 7,000 against Output SGST 10,000: Output SGST payable 3,000.
Total payable: CGST nil, SGST 3,000, IGST nil = ₹3,000; ₹1,000 input CGST carried forward.

Answer: Payable ₹3,000 (SGST); ₹1,000 input CGST carried forward.

Example 5: Return and tax · 3 marks · Short answerHOTS / competency

A buyer returns goods bought in the same state for ₹10,000 plus 18% GST. Give the entry in the buyer's books, and say what change it makes to the input credit. (3 marks)

Try it first, then show the solutionSolution

Supplier A/c Dr 11,800; To Purchases Return 10,000; To Input CGST 900; To Input SGST 900.
The input credit is reduced by ₹1,800 because the goods are returned; less credit can be set off.

Answer: Dr Supplier 11,800; Cr Purchases Return 10,000, Input CGST 900, Input SGST 900.

Where students lose marks in GST in Journal Entries: Input Tax, Output Tax and Set-off

The slips examiners see most often, and what to write instead.

Mistake: Charging GST on the list price
Ignoring the trade discount.
Wrong working
GST on 80,000.
Right working
GST on the taxable value after discount: 72,000.
Do this: Deduct trade discount first.
Usually costs: 1 mark
Mistake: Showing full GST as CGST for an inter-state sale
Missing the IGST rule.
Wrong working
CGST 8,640.
Right working
IGST 8,640.
Do this: Place of supply decides.
Usually costs: 1 mark
Mistake: Setting off CGST against SGST
Not knowing the restriction.
Wrong working
Output SGST reduced by Input CGST.
Right working
Input CGST is used against output CGST, then IGST.
Do this: Remember CGST and SGST never cross.
Usually costs: 1 to 2 marks

Exam tips

Write the taxable value on a separate line before computing GST.
Keep the tax accounts under the right name: Input/Output CGST/SGST/IGST.
Show the order of set-off in numbered steps.
Check the entry totals: Dr total = Cr total.

Practice questions on GST in Journal Entries: Input Tax, Output Tax and Set-off

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

Q1 · 1 mark · MCQBoard level
Input CGST is a(n):
(a) liability
(b) asset
(c) expense
(d) income
Hint
Credit that can be used.
Answer
(b) asset
Q2 · 3 marks · Short answerHarder board level
Pass the entry in the books of the seller: goods of ₹60,000 sold to Jay in another state for cash at 5% GST. (3 marks)
Hint
Inter-state.
Answer
IGST = 5% of 60,000 = ₹3,000. Cash A/c Dr 63,000; To Sales 60,000; To Output IGST 3,000.
Q3 · 4 marks · Short answerHarder board level
In a month, a firm's Output CGST is ₹14,000 and Output SGST ₹14,000; Input CGST ₹6,500, Input SGST ₹8,000 and Input IGST ₹5,000. Apply the set-off and find the GST payable. (4 marks)
Hint
Use IGST credit first on IGST, then CGST, then SGST.
Answer
Input IGST 5,000 against Output CGST 14,000 (no output IGST): output CGST 9,000. Input CGST 6,500: output CGST 2,500. Input SGST 8,000 against output SGST 14,000: 6,000. Payable: CGST 2,500 + SGST 6,000 = ₹8,500.
Q4 · 1 mark · Assertion-reasonHarder board level
Assertion (A): Input IGST can be used to pay output CGST and output SGST.
Reason (R): IGST credit may be set off against IGST first and then against CGST and SGST in that order.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is true, but R is false.
(d) A is false, but R is true.
Hint
IGST credit is the most flexible.
Answer
(a) Both A and R are true, and R is the correct explanation of A.
Q5 · 5 marks · Short answerHOTS / competency
A trader in Delhi buys goods of ₹2,00,000 from a Delhi supplier (GST 18%) and sells them for ₹3,00,000 to a Delhi customer (GST 18%) and ₹1,00,000 to a Jaipur customer (GST 18%) on credit. Find the Output CGST, SGST, IGST, the Input credits and the net GST payable. (5 marks)
Hint
Mixed sales.
Answer
Input CGST = SGST = 18,000. Output on Delhi sale: CGST = SGST = 27,000. Output IGST on Jaipur sale = 18,000. Set-off: Input CGST 18,000 against output CGST 27,000: 9,000 payable. Input SGST 18,000 against output SGST 27,000: 9,000 payable. IGST 18,000 payable (no input IGST). Total payable = 9,000 + 9,000 + 18,000 = ₹36,000.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

1.GST on intra-state sale?Show answer
CGST plus SGST, each half the rate.
2.GST on inter-state sale?Show answer
IGST at the full rate.
3.Which tax account is credited on sale?Show answer
Output CGST/SGST/IGST.
4.Can input CGST be set off against output SGST?Show answer
No.
5.GST payable is?Show answer
Output tax less input tax credit.

GST in Journal Entries: Input Tax, Output Tax and Set-off: frequently asked questions

Is GST charged on trade discount?

No; it is charged on the taxable value after trade discount.

What happens if input is more than output?

The balance is carried forward as input credit.

Who pays GST finally?

The consumer bears it; each seller pays only the tax on the value added.