Accounting for Goods and Service Tas (GST) — Important Questions

Traders under composition scheme pay 1% GST on turnover and cannot claim input tax credit.

Step 1: The Composition Scheme is for small taxpayers with turnover up to ₹1 crore (₹50 lakh in some North-Eastern states). Step 2: Key rates under composition scheme: Traders — 1% of turnover; Restaurant sector — 2.5% of turnover; Other suppliers — 0.5% of turnover. Step 3: A critical feature of this scheme is that businesses CANNOT claim Input Tax Credit — meaning GST paid on purchases cannot be set off against GST payable on sales. Step 4: Option A is wrong — service providers (other than restaurants) generally CANNOT opt for composition scheme. Option C is wrong — turnover limit is ₹1 cror

Drawings A/c Dr. ₹23,600; To Purchases A/c ₹20,000; To Input CGST A/c ₹1,800; To Input SGST A/c ₹1,800

Step 1: When goods are withdrawn by proprietor for personal use, it is treated as 'Drawings'. Step 2: CGST = 9% of ₹20,000 = ₹1,800; SGST = 9% of ₹20,000 = ₹1,800 (18% GST split equally = 9% CGST + 9% SGST). Step 3: Since goods are taken out of business for personal use, the Input GST (which was an asset) can no longer be claimed — it must be reversed by crediting Input CGST and Input SGST accounts. Step 4: Total Drawings = ₹20,000 + ₹1,800 + ₹1,800 = ₹23,600. Option A is wrong — ignores GST. Option B is wrong — Output GST is for sales to customers, not for personal withdrawals. Option D is wr

₹30,000

Step 1: Calculate net CGST payable = Output CGST − Input CGST = ₹60,000 − ₹45,000 = ₹15,000. Step 2: Calculate net SGST payable = Output SGST − Input SGST = ₹60,000 − ₹45,000 = ₹15,000. Step 3: Total GST to be deposited = Net CGST + Net SGST = ₹15,000 + ₹15,000 = ₹30,000. Step 4: Option A (₹1,20,000) is wrong — that would be total Output GST without any set-off. Option C (₹15,000) is wrong — that is only the CGST or SGST portion, not the total. Option D (₹90,000) is wrong — that represents total Input GST, which cannot be deposited.

Central Government only as IGST, which may later be shared with Punjab

Step 1: This is an inter-state (outside state) transaction — goods moving from Himachal Pradesh (producing state) to Punjab (consuming state). Step 2: For inter-state transactions, IGST applies. IGST = 12% of ₹1,00,000 = ₹12,000. Step 3: GST is a destination-based tax. The tax revenue goes to the consuming state (Punjab), not the producing state (Himachal Pradesh). Step 4: IGST is first collected by the Central Government and then transferred/shared with Punjab (the consuming state). Options A and C are wrong — Himachal Pradesh does not get the revenue as it is not the consuming state. Option