Journal entries: purchases, expenses and payments (12 situations)
Entries for GST purchases, returns, freight under RCM, contractor and rent payments with TDS, blocked credits and advances.
1. Purchase on credit: "We bought goods for ₹1,18,000 including 18% GST"
Within the state: taxable value ₹1,00,000, CGST ₹9,000, SGST ₹9,000.
| Dr/Cr | Ledger | ₹ |
|---|---|---|
| Dr | Purchases | 1,00,000 |
| Dr | Input CGST | 9,000 |
| Dr | Input SGST | 9,000 |
| Cr | Supplier | 1,18,000 |
GST: Claim ITC only when the invoice shows in GSTR-2B, the goods are received, and the supplier has paid the tax.
Check: Pay the supplier within 180 days or reverse the ITC.
2. Small cash purchase
₹11,800 including GST, paid in cash.
| Dr/Cr | Ledger | ₹ |
|---|---|---|
| Dr | Purchases | 10,000 |
| Dr | Input CGST | 900 |
| Dr | Input SGST | 900 |
| Cr | Cash | 11,800 |
Watch out: The payment is above ₹10,000 in cash to one person in a day, so the whole expense is disallowed for income tax (old 40A(3)). Pay by bank or UPI.
3. Returning goods to a supplier
₹5,000 + GST returned. Record it as a debit note or the supplier's credit note.
| Dr/Cr | Ledger | ₹ |
|---|---|---|
| Dr | Supplier | 5,900 |
| Cr | Purchase Returns | 5,000 |
| Cr | Input CGST | 450 |
| Cr | Input SGST | 450 |
The supplier's credit note must appear in GSTR-2B. Reduce ITC by that amount.
4. Freight inward from a transporter (GTA) under reverse charge
Freight ₹10,000. The GTA charges 5% under RCM. You pay the GST, not the transporter.
| Dr/Cr | Ledger | ₹ |
|---|---|---|
| Dr | Freight Inward | 10,000 |
| Cr | Transporter | 10,000 |
| Dr | Input CGST (RCM) | 250 |
| Dr | Input SGST (RCM) | 250 |
| Cr | CGST Payable (RCM) | 250 |
| Cr | SGST Payable (RCM) | 250 |
GST: Pay the RCM tax in cash through GSTR-3B (table 3.1(d)). Claim the ITC in the same return (table 4A(3)).
5. Contractor bill with TDS
Bill: ₹1,00,000 + 18% GST. The contractor is a company, so TDS is 2% on ₹1,00,000 (s.393, old 194C).
| Dr/Cr | Ledger | ₹ |
|---|---|---|
| Dr | Contract Charges | 1,00,000 |
| Dr | Input IGST | 18,000 |
| Cr | Contractor | 1,18,000 |
| Dr | Contractor | 2,000 |
| Cr | TDS Payable (contractors) | 2,000 |
Then pay ₹1,16,000: Contractor Dr → Bank Cr.
6. Monthly rent with GST and TDS
Rent ₹60,000 + 18% GST. TDS 10% applies because rent is above ₹50,000 a month (old 194-I(b)).
| Dr/Cr | Ledger | ₹ |
|---|---|---|
| Dr | Rent | 60,000 |
| Dr | Input CGST | 5,400 |
| Dr | Input SGST | 5,400 |
| Cr | Landlord | 70,800 |
| Dr | Landlord | 6,000 |
| Cr | TDS Payable (rent) | 6,000 |
Pay the landlord ₹64,800.
7. Depositing TDS with the government
| Dr/Cr | Ledger | ₹ |
|---|---|---|
| Dr | TDS Payable | 8,000 |
| Cr | Bank | 8,000 |
Deposit by the 7th of the next month (30 April for March). Late payment carries interest (see Interest, late fee and disallowance for TDS mistakes).
8. Expense with blocked ITC: staff lunch
₹5,900 including GST.
| Dr/Cr | Ledger | ₹ |
|---|---|---|
| Dr | Staff Welfare | 5,900 |
| Cr | Bank | 5,900 |
GST: No ITC. Food and beverages are blocked under s.17(5), unless you supply them onward or they are required by law. Put the full amount in the expense.
9. Advance paid to a supplier
| Dr/Cr | Ledger | ₹ |
|---|---|---|
| Dr | Supplier (advance) | 50,000 |
| Cr | Bank | 50,000 |
Adjust it against the bill when it arrives.
10. Paying the supplier
| Dr/Cr | Ledger | ₹ |
|---|---|---|
| Dr | Supplier | 1,18,000 |
| Cr | Bank | 1,18,000 |
GST: None at payment.
11. Electricity and other exempt or non-GST expenses
| Dr/Cr | Ledger | ₹ |
|---|---|---|
| Dr | Electricity | 8,500 |
| Cr | Bank | 8,500 |
Electricity is exempt from GST, so there is no ITC. Petrol and diesel are outside GST.
12. Bank charges
| Dr/Cr | Ledger | ₹ |
|---|---|---|
| Dr | Bank Charges | 500 |
| Dr | Input CGST | 45 |
| Dr | Input SGST | 45 |
| Cr | Bank | 590 |
Claim ITC if the bank's GST invoice shows your GSTIN.
What affects what: a purchase bill
Purchase bill
├─ Purchases / Expense → P&L cost ↑ (or stock ↑)
├─ Supplier ledger → Payables ↑ → Creditors ageing
├─ Input GST ledgers → Match with GSTR-2B → ITC in GSTR-3B
├─ TDS (if applicable) → TDS Payable → Challan → TDS return
└─ Stock item → Inventory ↑In Hisab Central
- Purchase bill: Purchase (F9)
- Payment: Payment (F5)
- Supplier return: Debit Note (Alt+N)
- RCM tax and adjustments: Journal (F7)
- Match purchases to GSTR-2B: GST → Reconcile purchases with GSTR-2B
Sources
- CGST Act 2017 — sections 9(3), 16, 17(5), 34
- Income-tax Act 2025 — section 393 (TDS rates, old 194C/194-I/194J)
Last verified: 30 Sep 2026.