Non Deductible GST where Input Tax Credit(ITC) Can not be availed- Configurations in Microsoft Dynamics 365 Finance and Operations

Dear Microsoft BizApps Community,

Welcome to my next blog on INDIA GST series in Microsoft Dynamics 365 Finance and Operations.

In this article we shall talk about GST scenario where input tax credit cannot be availed, the scenarios are explained in detailed here in the portal https://cleartax.in/s/gst-cases-where-input-tax-credit-is-unavailable

Accounting entry for scenario where input tax credit cannot be availed

Once you have gone through the doc from the above link, let see how the accounting entry will look like for GST scenario where input tax credit cannot be availed.

10000 as goods purchased and applicable IGST 18%= 1800 INR, here Input Tax credit (ITC) cannot be availed, hence the GST amount must be booked into the expense account, which is used in the transactions.

670000 Expense account Dr 10000 INR

IGST or CGST/SGST 18%= Dr 1800 INR, this will be booked in the same expense account, 670000

Vendor balance 11800 CR

Tax Configuration Setup for Non Deductible GST where Input Tax Credit(ITC) Can not be availed

Navigate to Tax Setup-> Setup

Navigate to GST component SGST, CGST, IGST individually, we shall see the setup for IGST in this case, same should be configured for SGST and CGST as well.

Add HSN/SAC code into the “Rate” section first

At first add the HSN/SAC codes to the “Rates” section with tax rate type

Now add the same HSN/SAC code to the “Load on Inventory Percentage” section with HSN Code/SAC code along with Tax rate type and Percentage as 100%.

Note- the same setup must be configured for SGST and CGST component for respective intra state scenario.

The load on inventory 100% means, this will 100% will be booked into the expense account from the transactions, rather than GST account

The Configurations are done, now we shall see the transactions by using the same HSN in one of the Vendor transactions

Lets create one invoice journal and use the same HSN code we have created along with Tax Rate Type, see below in Tax information page

Before posting the journal, we can check the GST amount calculated and whether this is “Load on inventory” or not.

Navigate to “Tax Document” and click on that

To make sure if this is selected as “Load on inventory” or not, we can check the “Details” section in the “Tax Document” form.

Now let see after the posting of the invoice, see below

670000 Expense account Dr 10000 INR

IGST or CGST/SGST 18%= Dr 1800 INR, this will be booked in the same expense account, 670000

Vendor balance 11800 CR

Bingo!!! The Requirement is met

That’s it for this article, thanks for going through

Happy days