How GST Is Recorded Against Invoices and Bills in an ERP

Why a separate GST record matters

Printing GST on an invoice is not the same as recording it for compliance. A return needs figures grouped by type, rate, party and period, and those figures must agree with the documents. If GST exists only as a number on each invoice, someone has to collect and re-enter it at month end. A separate GST record, created from the document at the time it is raised, removes that step and gives you something to reconcile against.

What a GST record contains

In TradeFlow, each GST record describes one line of a document and carries what a return needs.

• The document type and number, and a link to the source document and line
• The party’s name, GSTIN and state, and the place of supply
• Whether the supply is intra-state or inter-state
• The HSN code, tax rate and taxable value
• CGST, SGST, IGST and cess amounts, and the total tax
• Reverse-charge fields, where they apply
• The GST period the entry belongs to, and whether it has been cancelled

How sales invoices become GST records

When a sales invoice is saved, TradeFlow creates a GST record for each invoice line, so an invoice with five lines produces five entries. Each entry is linked to its invoice and line, which means you can move from a GST figure to the invoice behind it. Credit notes work the same way, so a return reduces the figures in the same ledger instead of being adjusted separately.

How purchase bills become GST records

Purchase bills post to the GST ledger in the same way, which is where your input tax credit data comes from. A bill raised against a purchase order creates an entry for each order line with its HSN code and rate. A bill raised without a purchase order is recorded as a single entry for the whole bill, without HSN or rate detail, so TradeFlow flags a missing HSN code on it. Where you can, raise bills against purchase orders so each line carries the detail returns need.

Notes and job-work charges

Other documents also create GST records. Debit and credit notes raised in the finance module post when they are marked posted, and job-work service invoices, which record a job worker’s processing charge, post with their CGST, SGST or IGST split. Everything flows into the same ledger, so the return data has one source.

What happens when a document changes

Documents change after they are raised, so the GST record has to follow. In TradeFlow, editing an invoice or bill updates its GST entries in place, and deleting an invoice or credit-note line retires its entry. Cancelling a purchase bill marks its GST entries as cancelled and posts a reversing journal, and reports leave cancelled entries out. If a GST record cannot be created for a document, the document itself still saves, which is why reviewing the exceptions list and reconciling the return workings against your books both matter.

Periods and locking

Every GST entry belongs to a GST period. A period can be open, locked or marked filed, and TradeFlow refuses to write a GST entry into a period that is not open, and raises an exception instead. Unlocking a period needs a separate permission. Changes to GST records and periods are captured in the audit log, so it is possible to see who changed what after the fact.

Exceptions

When the data behind a GST entry is doubtful, TradeFlow lists a problem instead of hiding it: a missing HSN code, an invalid GSTIN, a place of supply that cannot be determined, or a rate outside the configured rates. Each item can be reviewed, resolved or ignored, with a status, and can be revalidated after you correct the master data. The list is worth checking weekly, because it is the quickest way to find records that would distort a return.

How the records feed returns and reports

The GST ledger is the source for TradeFlow’s GST working data. GSTR-1 data is prepared from the sales entries, the GSTR-3B working compares the month’s liability and credit with your books, and the GST and TDS page shows a register of output and input tax with an Excel export. The CA Compliance Dashboard gives your CA a single read-only view. TradeFlow prepares the return data; the returns themselves are filed outside TradeFlow, by you or your CA.

What is not in the GST records

Not every accounting entry becomes a GST record. In TradeFlow, expenses record their GST in the accounts, but they do not create entries in the GST ledger, so discuss with your CA how GST on expenses should be treated in your returns.

Where TradeFlow fits

TradeFlow is an ERP for Indian traders, wholesalers, distributors and dealers, and creates GST records from the invoices, bills and notes you raise. To see the effect on the tax split, read the guide to CGST, SGST and IGST in an ERP, or visit the GST compliance page.

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