GST Input Tax Credit Adjustments

This topic explains the requirement and process of GST credit adjustment.

Credit adjustment journal

Credit adjustment journal is designed to handle certain credit adjustments arising as an outcome of reconciliation.

  • Purpose of Credit Adjustments

    Nature of Adjustment Purpose of Adjustment
    Credit Reversal To reverse the availed credit for posted transactions. Detailed GST Ledger entries and Detailed Cr. Adjustment entries will be updated with Credit Adjustment type as ‘Credit Reversal’. Detailed Cr. Adjustment Entries will be created and updated with ‘Credit Availed’ as FALSE and ‘Liable to Pay’ as TRUE.
    Credit Re-availment To re-avail the reversed credit for posted transactions. Detailed GST Ledger entries and Detailed Cr. Adjustment entries will be updated with Credit Adjustment type as ‘Credit Re-Availment’. Detailed Cr. Adjustment Entries will be created and updated with ‘Credit Availed’ as TRUE and ‘Liable to Pay’ as FALSE.
    Permanent reversal To reverse a transaction permanently. Detailed GST Ledger entries and Detailed Cr. Adjustment entries will be updated with Credit Adjustment type as ‘Permanent Reversal’. Detailed Cr. Adjustment Entries will be created and updated with ‘Credit Availed’ as FALSE and ‘Liable to Pay’ as FALSE.

  • Need for Adjustment

    Nature of Adjustment Need for Adjustment
    Credit Reversal If provisional credit is availed and credit remains unmatched, then after a prescribed period, the credit gets auto-reversed in Credit ledger of GSTN Portal. To reverse such credit availment in the books of account and posted to respective GST mismatch account.
    Credit Re-availment If credit is reversed due to the reason that vendor payment is not made within 180 days or for any other reason. Subsequently, if the vendor payment is made, then the reversed credit can be re-availed. Hence, to re-avail the credit and post it to respective GST Receivable account.
    Permanent reversal If it is certain that the vendor will never upload the invoice information in GSTN portal, then the credit posted to respective GST Mismatch Account and post the same into respective GST expense account.

  • Accounting Entries

Nature of Adjustment Document Type Debit Credit
Credit Reversal Invoice GST Credit Mismatch Account GST Payable Account
Credit Reversal Credit Memo GST Payable Account GST Credit Mismatch Account
Credit Re-Availment Invoice Receivable Account GST Mismatch Account
Credit Re-Availment Credit Memo GST Mismatch Account Receivable Account
Permanent Reversal Invoice GST Expense Account GST Mismatch Account
Permanent Reversal Credit Memo GST Mismatch Account GST Expense Account
Hinweis

GST Credit Adjustment Journal can be posted by selecting 'Nature of adjustment type' as 'Credit Re-Availment' and 'Permanent Reversal' after posting GST Adjustment Journal for type 'Credit Reversal'. If the GST Credit Adjustment Journal is posted with 'Nature of Adjustment' as ‘Permanent Reversal’ then system will not consider these entries again for posting via adjustment type as ‘Credit Reversal’ or ‘Credit Re-Availment’.

GST credit adjustment for reverse charge transactions

Credit Adjustment Journal functionality is also available for adjusting reverse charge transactions where GST Group Type is 'Service'. This functionality is designed to handle certain adjustments arising on selecting GST Credit Type incorrectly at the time of transaction.

  • Purpose of Credit Adjustments for Reverse charge transactions

    Nature of Adjustment Purpose of Adjustment
    Credit Reversal To reverse the availed credit for posted transactions. Detailed GST Ledger entries and Detailed Cr. Adjustment entries will be updated with Credit Adjustment Type as ‘Credit Reversal’. Detailed Cr. Adjustment Entries will be created and updated with ‘Credit Availed’ as FALSE and ‘Liable to Pay’ as TRUE.
    Credit Re-Availment To re-avail the reversed credit for posted transactions. Detailed GST Ledger Entries and Detailed Cr. Adjustment entries will be updated with Credit Adjustment Type as ‘Credit Re-Availment’. Detailed Cr. Adjustment Entries will be created and updated with ‘Credit Availed’ as TRUE and ‘Liable to Pay’ as FALSE.
    Credit Availment To avail credit which is not availed in posted transactions. Detailed GST Ledger Entries and Detailed Cr. Adjustment entries will be updated with Credit Adjustment Type as ‘Credit Re-Availment’. Detailed Cr. Adjustment Entries will be created and updated with ‘Credit Availed’ as TRUE and ‘Liable to Pay’ as FALSE.
    Reversal of Availment To reverse the availed credit in above scenario. Detailed GST Ledger Entries and Detailed Cr. Adjustment entries will be updated with Credit Adjustment Type as ‘Permanent Reversal’. Detailed Cr. Adjustment Entries will be created and updated with ‘Credit Availed’ as FALSE and ‘Liable to Pay’ as FALSE.

  • Need for Adjustment

    Nature of Adjustment Need for Adjustment
    Credit Reversal If GST Credit is selected as Availment in transactions and later on realized that it has been incorrectly selected, then this adjustment allows to reverse credit and post it to respective GST Payable Account.
    Credit Re-Availment If GST Credit is selected as Non-Availment in transactions and later realized that it has been incorrectly selected, then this adjustment allows to Avail Credit and post it to respective GST Receivables Account.
    Reversal of Availment Reversal of Availment will be used to reverse the entries posted for Credit Availment. System will Re-Avail Credit and post it to respective GST Receivable Account.

  • Accounting Entries

    Nature of Adjustment Document Type Line Type Debit Credit
    Credit Reversal Invoice G/L Account G/L Account selected in transaction GST Payable Account
    Credit Reversal Invoice Item Respective Purchase Account GST Payable Account
    Credit Reversal Invoice FA FA Acquisition Account GST Payable Account
    Credit Re-Availment Invoice G/L Account Receivable Account G/L Account selected in transaction
    Credit Re-Availment Invoice Item Receivable Account Respective Purchase Account
    Credit Re-Availment Invoice FA Receivable Account FA Acquisition Account
    Credit Availment Invoice G/L Account Receivable Account G/L Account selected in transaction
    Credit Availment Invoice Item Receivable Account Respective Purchase Account
    Credit Availment Invoice FA Receivable Account FA Acquisition Account
    Reversal of Availment Invoice G/L Account G/L Account selected in transaction GST Payable Account
    Reversal of Availment Invoice Item Respective Purchase Account GST Payable Account
    Reversal of Availment Invoice FA FA Acquisition Account GST Payable Account
Hinweis
  • GST Credit Adjustment Journal can be posted as Credit Re-Availment after posting GST Adjustment Journal for Type Credit Reversal.
  • GST Credit Adjustment Journal can be posted as Reversal of Availment after posting GST Adjustment Journal for Type Credit Availment.
  • Permanent Reversal is not applicable for reverse charge transactions.
  • The Credit Adjustment for reverse charge transactions can be executed only for GST Group Type as 'Service'. The GST credit and liability for reverse charge transactions, where GST Group Type is 'Service' is realized only on application of payment. System will filter application entries in GST Credit Adjustment Journal for reverse charge scenarios.

GST credit adjustment entry process

  1. Choose the Search for Page or Report. icon, enter GST Credit Adjustment, and then choose the related link.
  2. GST Credit Adj. Jnl Nos. should not be blank on General Ledger Setup.
  3. GST Credit Adjustment Journal should not be blank on Source Type Setup.

  4. Select relevant information for following fields in GST Credit Adjustment Journal

    Field Description
    GST Registration No. Specify the GST registration number for which adjustment is to be done.
    Period Month Specify the relevant month of adjustment.
    Period Year Specify the relevant year of adjustment.
    Posting Date Specify the posting date of the adjustment entry.
    Vendor No. Specify the relevant vendor for which adjustment is to be done.
    Document No. Specify the document number for which adjustment is to be done.
    External Document No. Specify the vendor invoice reference number for which adjustment is to be done.
    Nature of Adjustment Specify the relevant nature of adjustment.
    Input Service Distribution Specifies whether the GST registration number is assigned for input service distribution.
    Reverse Charge Specifies whether the adjustment will be done for Reverse Charge entry or not.
    Adjustment % Select applicable % (1% to 100%). Based on the applicable %, system will create lines and % value can be modified. Partial amount can be posted in Credit Adjustment.

  5. Once relevant values are selected on the request page, click on Apply Entries.

  6. Check the documents and values and click on Action -> Posting -> Dimensions or Line Dimension, fill the relevant dimensions and post the entry.

See Also

GST Settlement

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