Creating Statutory Adjustment Journal

Use the statutory adjustment journal to adjust the calculated CGST, SGST/UTGST, or IGST on advance receipt or payment at the time of supply of goods and services.

In addition, you can also use statutory adjustment journal to enter ITC (Input Tax Credit) reversal adjustment for GST claims in case you do not meet the specific ITC claim conditions. For example, entering late fees or interest liabilities for a purchase transaction.

Statutory Adjustment Journal records are reflected in the GST3B report under section 5.1 Interest & Late Fee Payable.

To create a statutory adjustment journal:

Go to Transactions > Financial > Make Journal Entries.
In the Custom Form field, select India Statutory Adjustments.
Complete the necessary fields on top of the of the form as described in Making Journal Entries.
In the Tax Information section, enter values for the following fields:
1. In the Nexus field, select the nexus, if any, associated with this journal entry.
2. In the Subsidiary Tax Reg. Number field, select the tax registration number, if any, associated with this journal entry.
3. In the Adjustment Type field, select the adjustment type for this journal entry.
4. In the Adjustment Sub Type field, select the adjustment subtype for this journal entry.
5. In the Place of Supply field, select the place of supply for this journal entry.
6. In the Classification of Supply field, select the classification of supply for this journal entry.
On the Lines subtab, enter the detail information for the journal lines.
1. In the Account field, select the ledger account to be affected by this journal entry.
  
  Note:
  Select at least one ledger account for the adjustment journal. Accounts selected must be of type Other Current Liability or Other Current Asset.
2. Enter the Debit or Credit amount for the line.
3. In the India Tax Account box, check if the journal line account is a tax account for India.
4. Complete any of the following optional fields:
  - Memo – Enter a memo to help you recognize this journal entry in a register for this account.
  - Name – Select an entity to associate with this journal entry. Click the double down arrows to select List or Search options for your selection.
  - Department – If you have enabled Departments, and you classify at the transaction-level rather than the line-level, select the appropriate classification to associate with this journal entry.
  - Classes – If you have enabled Classes, and you classify at the transaction-level rather than the line-level, select the appropriate classification to associate with this journal entry.
    
    For information about Departments and Classes, see Departments and Classes Overview.
  - Location – If you have enabled Locations on the Company subtab of the Enable Features page and you specify classifications at the line-level, select the appropriate location to associate with this line.
    
    For information about Locations, see Locations Overview.
5. Click Add.
Click Save.

Statutory Adjustment Journal Example

The following scenario provide an example of when to create a statutory adjustment journal.

The company Wolfe has a purchase transaction (PO 1234) that includes goods worth of INR 10,000 for its employees as incentives. The goods purchased are not for business purposes, thus making the transaction not eligible for ITC (Input Tax Credit) claims. However, this purchase transaction will reflect on company Wolfe’s GST report. You will need to do a reversal of ITC for this transaction while filing your GST report.

For example:

On the image below, the statutory adjustment journal has sub type of Amount in terms of rule 42(1)(m) because goods purchased in PO 1234 is not for business purposes.

An example of statutory adjustment journal.

To create a statutory adjustment journal:

Statutory Adjustment Journal Example

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