Purchases and input tax credit
Record supplier bills so you claim back the GST you paid, and track what you owe.
What it is
Every bill from a supplier. The GST on it becomes input tax credit (ITC) — money you subtract from the GST you collected — unless you mark it ineligible (for example, personal use or a blocked item).
Steps
- Accounting → Purchases → Record a bill. Pick the supplier (or a dropship supplier — it is added to Parties by itself), type the bill number and date exactly as printed.
- Tick Supplier is in another state if it is (IGST). Leave ITC eligible ticked unless your CA says otherwise.
- Add the lines, attach the bill file, Record bill. The amount goes to Sundry Creditors (what you owe) until you pay.
- Purchase return: Purchases → Record a bill → kind "return", against the original bill. It reverses the credit.
- Pay the supplier from Receipts & payments.
Reverse charge
Tick Reverse charge when you, the buyer, must pay the GST (some unregistered suppliers, certain services). The books then owe the tax as output and claim it as input in the same entry; the supplier is owed only the taxable value. Ask your CA if unsure.