GST passes through a business rather than belonging to it. Recording it in the right ledgers on every invoice is what lets the books, the GST reports and the returns agree without rework at month end.
GST is a liability and a credit, not income or expense
For a registered business, GST charged on sales is owed to the government, and eligible GST paid on purchases is a credit that can be used against it. Neither is part of your sales or purchase value. Credit that is not eligible, or is reversed, becomes part of the cost instead.
The ledgers most businesses keep
- Output CGST, output SGST (or UTGST) and output IGST, for tax charged on sales.
- Input CGST, input SGST (or UTGST) and input IGST, for credit on purchases.
- Ledgers for tax payable under reverse charge, and for cess where it applies.
- A way to track credit that is reversed, blocked or reclaimed.
What a sale and a purchase post
Two examples at an illustrative rate of 18%. A sale of ₹10,000 within the state: the customer is debited ₹11,800, sales are credited ₹10,000, and output CGST and output SGST are credited ₹900 each. A purchase of ₹5,000 from another state: purchases are debited ₹5,000, input IGST is debited ₹900, and the supplier is credited ₹5,900.
Set-off and payment
For each period, eligible input tax credit is used to pay output tax in the order the law prescribes across IGST, CGST and SGST, and the balance is paid in cash. After set-off, the GST ledgers in your books should show the same net position as your return.
Reconcile every month
- Output tax ledgers against GSTR-1 and GSTR-3B.
- Input tax ledgers against GSTR-2B and the credit you claimed.
- Reversals and reclaims recorded in the books in the same period as in the return.
General information about GST processes, last reviewed on 8 October 2026. Rules, limits and due dates change by notification; this is not tax advice. Confirm what applies to your business with your tax adviser.
Common questions
What is GST accounting software?
Accounting software that records GST as part of each transaction, keeps output tax and input tax credit in separate ledgers, and produces GST reports from the same entries as the books, so the returns and the accounts agree.