Enabling GST in Tally

Enabling GST in Tally

1. What is Goods and Service Tax Act 2017?

GST is an Indirect Tax which has replaced many Indirect Taxes in India. The Goods and Service Tax Act was passed in the Parliament on 29th March 2017 and came into effect on 1st July 2017; GST Law in India is a comprehensive, multi-stage, destination-based tax that is levied on every value addition. In simple words, GST is an indirect tax levied on the supply of goods and services.

2. Types of taxes under GST

There are currently three types of GST:

  • CGST – Central GST: Applies to sales within the state – goes to Central Government
  • SGST – State GST: Applies to sales within the state – goes to State Government
  • IGST – Integrated GST: Applies to sales outside the state – goes to Central Government

For example, if you sell something within the state, 50% of the GST will be CGST and 50% of the GST will be SGST. But when you sell something outside a state, 100% of it will be IGST which will go to the Central Government.

Now that you have a basic understanding of how GST works, here’s how it works in Tally along with its accounting and calculation.

3. How to begin Tally ERP 9?

In order to use Tally, following steps must be followed

To create a company in Tally
To enable GST Features
To create ledgers

To create a company in Tally

Step1Go to Gateway of Tally > Alt + F3 > Create Company
Step2Enter the basic information, i.e., name, mailing name and address of the company, currency symbol etc.
Step3In the ‘maintain field’, select Accounts Only or Accounts with Inventory as per the company requirements.
step4In the Financial Year from, the first day of the current financial year for e.g., 1-4-2018 will be displayed by default, which can be changed as per requirement.
Step5Enter the Tally Vault Password if required.
Step6Press Y or Enter to accept and save.

To enable GST features in Tally

Step1Go to Gateway of Tally > F11: Features > F3 : Statutory & Taxation
Step2In the screen you will find following options : -Enable goods and service tax (GST) : YesSet/alter GST Details : Yes.This will display another screen where you can set GST details of the company such as the state in which company is registered, registration type, GSTIN number etc.
Step3Press Y or Enter to accept and save.

To Create Ledgers

After creating a company and activating GST features, you need to create ledgers that will enable you to pass accounting entries in Tally ERP 9.

Step 1Go to Gateway of Tally > Accounts Info > Ledgers > Create
Step 2Create ledgers such as Purchase, Sales, State GST, Central , Integrated GST, Stock item names etc.
Step 3Select the appropriate group to which such ledger belongs for example state tax under duties and taxes group.
Step 4Enter the other related information required and press Y or Enter to accept and save.

After creating ledgers we can proceed with preparing Accounting entries in Tally ERP 9 as follows:

Gateway of Tally > Accounting Vouchers

There are many accounting vouchers in Tally such as Payment, Receipt, Contra, Sales, Purchase, etc. After choosing the relevant voucher we start passing the accounting entries.

4. How will GST work in Tally.ERP 9?

The functionality of GST in Tally is almost same as prevalent during erstwhile taxation laws such as VAT or CST or Service Tax.

The first step before passing an Accounting Entry in Tally is to make GST Calculation. But first let’s take an example for our understanding. For Ex : M/s ABC Ltd of Mumbai sold goods worth Rs. 50,000/- to M/s XYZ Inc. of Ahmedabad ; GST rate applicable for the given product is 18%

GST CalculationM/s ABC Ltd has to collect GST and say it is 18%. Then GST will come at Rs. 9,000/-.
Taxable ValueThis is the portion on which tax will be levied (i.e.,) Rs. 50,000/- in this case.
Type of Tax to selectSince it is a transaction involving Inter State trade , the ledger to create and select while preparing Accounting entry is IGST ledger.
Rate of Tax to be fed during Tax Ledger creation screen18% IGST (Tax type : Integrated Tax) .
Tax rate to key while preparing Stock Item Ledger18% IGST and Tally will automatically bifurcate and distribute the tax rate to CGST and SGST as 9% each.
Other ledgers to createCreate XYZ Inc., ledger along with GSTIN number.

Now we have to go to Accounting Voucher Screen and fit these details in Sales Voucher screen (F8). We are also not required to worry about tax calculation as Tally automatically calculates Tax amount portion based on the details fed in Stock Item Creation Screen and Tax ledger creation screen.

Source: Tally Solutions

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