As per GST, all expenses can be categorized into three major categories:
GST Applicable Expenses: Most of the expenses like Office Stationery, Food & Beverages, Telephone Expense, Transportation Charges, Office Maintenance and Job-work Charges etc. come under this category. Each expense has a specific GST Rate, SAC/HSN Code, Reverse Charge Nature and Input Tax Eligibility. These expenses need to be configured and booked with utmost care as all the details related to these expenses will be reflected in GST reports.
GST Not Applicable Expenses: Some of the expenses are out of the scope of GST like Salary & Wages to Staff, Interest on Loan and Bank Interest etc. These expenses do not attract GST and need not be reported in GST reports.
Non-GST Expenses: Some of the Goods/Services have been classified as Non-GST expenses, means some other tax is levied on them. Expenses like Water & Electricity and Petrol & Diesel are Non-GST Expenses. Although GST is not applicable on these expenses, they need to be reported as Non-GST supplies in GST reports.
So, while creating/modifying an expense account, we need to specify correct ‘GST Type’ (out of above three).
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