DOES GST REPORT NEED TO MATCH WITH P&L?

Created by Anna Maglinao, Modified on Wed, 13 Nov, 2024 at 1:40 PM by Anna Maglinao

A2000 ONLINE SUPPORT DEPARTMENT

KNOWLEDGE BASE

DESCRIPTION: As GST is a Tax on Gross Profit, does the GST payable need to tie with my Gross profit in the P&L Report?

DOES GST PAYABLE NEED TO TIE WITH GROSS PROFIT?

It is useful to cross check, but it does not necessarily need to tie.

For example if the GST is 8%, the ideal scenario is:

A company could have Sales of $100,000 (Output Tax $8000 collected)
Cost of Sales (purchases) could be $80,000 (Input Tax of $6,400 paid)
Gross Profits is $20,000, of which they need to pay ($8000 - $6,400) to the tax dept
The figure is $1600 payable (which ties to 8% x $20,000)

However, not all items in the P&L are tied to GST-related transactions. For example:

NON-REVENUE - for example sale/disposal of capital assets may attract GST but these are not booked into the P&L as part of gross profits

DEFERRED SALES (or advance incomes) – when these are booked-in, GST is charged and picked up in GST report. But these are considered “liability items” in balance sheet (and not reflected in P&L).

JOURNAL ADJUSTMENTS - such entries are common and may be passed directly to the GL and impact the P&L - but not necessarily picked up in GST report.

INVENTORY WRITE-DOWN – these could be obsoleted or damaged stocks and written off. The double entry is likely to hit the Cost of Goods Sold A/c, but there are no impact on GST.

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