GST Composition accounting & create bill of supply in tally erp9

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Composition scheme is the tax payment scheme introduced by GST council in order to reduce the tax burden of small business owners with the annual turnover of less than 1 (one) crore. ( In north  eastern states and Himachal pradesh limit is less; it is 75 lakhs) By implementing composition scheme government  expect minimal evasion of tax.  How ever there are lots of disadvantages for business choosing this scheme. The business cannot eligible to avail Input tax credit, cannot trade out of state,and he cannot sell exempt goods.Service providers are not eligible for this scheme. A composition dealer is liable for the payment of tax under reverse charge at normal rate of supplies. He is not eligible for input tax credit against the tax paid In this chapter we will learn

  • How to create composition company  in tally
  • GST composition ledger creation
  • GST composition entries in tally erp 9

Tax rates for composition scheme

For manufacturer’s and traders of goods Total 1 %  Central tax 0.5 % and State tax 0.5%

For Restaurants not serving alcohol Total 5% Central tax 2.5% and state tax 2.5%

Returns to be submitted by  Composition Scheme opted dealers.

GSTR-4 is the return to be submitted by the composition dealer.This is the quarterly return, The date of quarterly return submission is the next month 18th of ending the quarter. Also GSTR-9A is the annual return to be submitted by a composite dealer.The last date of filing annual return is the 31 December of next financial year.

Invoice of Composition scheme or bill of supply

The composition dealers are not allowed to collect tax in the invoice. To identify the invoice of composite dealer.Department has given a separate name called ‘bill of supply’ Also mention ‘Composite Dealer Not Eligible to Collect Tax‘ as sub heading.

Use tally for composition dealer

Tally provides two options for GST Accounting .One is regular and the second one is composition.In earlier version you cannot find composition accounting option. From Tally ERP 9, release 6.4 you will find gst composition. You need to keep the track of total turnover you achieved during the year. Once you crossed the turnover 1.5 crore,The registration type automatically changed to Regular and you can charge tax in the invoice and can avail Input tax credit.

Activate Composition scheme in tally erp 9

To activate composition scheme go to

F11 Features>F3 Statutory&taxation

Enable goods and service tax (GST): Yes

Set/alter GST details: Yes

In the GST details screen fill as shown below

Activate gst composition scheme

Press enter key and save all screens.

By enabling the option “Enable tax rate for purchase“: will help you to enter tax rate in the service ledgers and stock items for calculating tax. This will help you in calculating reverse charge during certain purchases and there are taxes in the invoices of purchase from a regular dealer, you can input all those along with purchase amount.

Creating Stock items and ledgers for GST composition

Stock item creation for composition scheme

Gateway of tally>Inventory info>stock item>Create

GST Composition scheme stock item creation

Set/alter GST Details to enter gst rates for purchase entry .

GST Details for composition stock item

If not all the options mentioned above is

Note:The rate entered is only meant for auto calculating the tax in the purchase voucher, This rate will not be applicable when you are entering Composition sale entry.

Select the tax ability as Taxable if it is taxable under GST or Exempt or Nil rated as applicable in GST Rule.

Create Suppliers Ledger for composition dealer accounting in tally erp 9

A composition dealer can purchase from

  1. Local composition dealer.
  2. Local Registered dealer.
  3. Interstate registered dealer.
  4. Local  & Interstate unregistered dealer.

Supplier ledger creation local composition

local composition supplier

In the same manner, for creating

Local registered dealer

The Registration type should be selected regular, state should be the same state of your gst registration.

Interstate registered dealer

Registration type , regular & state should be selected other than the state of your business registered in GST.

Local Unregistered dealer 

Registration type : Unregistered , & state same state of your company.

Sales ledger creation for composition dealer

To create sales ledger go to

Gateway of Tally>Accounts Info>Ledger Create

Do as in the screen shot below

Is GST Applicable: Yes

Set/alter GST Details:Yes

Taxability :Select taxable ,Exempt,Nil Rated.

Purchase Ledger creation for composition dealer

To creating Purchase ledger

Gateway of Tally>Accounts Info>Ledger Create

  1. The tax rate set in this ledger will be used for the auto calculation of purchase tax purchased from registered regular dealers ( accounted as expense in composition scheme) and
  2. Calculating tax for reverse charge purchase tax payable to government.

Create purchase ledger for composition scheme

Is GST Applicable: Applicable

Set/alter gst details: Yes

Select taxability

Enter integrated tax and save.

Create Party Ledger,  customer ledger for Composition dealer

A composition dealer can make sale to

  1. Local Composition dealer.
  2. Local Registered dealer.
  3. Local Unregistered dealer.

Go to Gateway of Tally > Accounts Info. > Ledgers > Create.

To create Local Registered customer

local registered customer

Creating Local un registered customer ledger

The registration type shall be : Un registered, the state must be the same state of your company registered.

Creating local composition dealer customer ledger

Registration type: Composition  , State: Same state of your business.

Select the registration type of party & enter GSTIN/UIN

Create GST Tax ledger for Composition

As in composition scheme you cannot collect tax in the invoice and at the same time you are not allowed to take input tax credit.Hence Tax paid at the time of purchase treated as expense. As it is an addition to purchase we can put this tax under Direct expense.

To create GST tax ledger

Go to Gateway of Tally > Accounts Info. > Ledgers > Create.

Create tax ledger for composition scheme

Make sure that you put the tax ledger under direct expense

Appropriate tax values in purchase invoice: Yes, This will add the tax amount along with purchase  in profit and loss account.

Enter Key and save

Similarly Create CGST & IGST ledgers.

Create expense or income ledger for GST composition

Some times we may need to add some expenses like transportation, packing charges in the invoices that forms the part of the item or service value.

To create Expense or income ledger 

Go to Gateway of Tally > Accounts Info. > Ledgers > Create.

Expense ledger for gst

Type of ledger:  Not Applicable

Is GST Applicable: Not Applicable

Include in assessable value calculation for : GST.

 Appropriate to:

  • Goods, for additional expenses or incomes on goods.
  • Services, for additional expenses or incomes on services.

Press enter and save the screen.

Discount Ledgers for stock item and services for composition

Some times we may sell or buy goods or services with discount in invoice.The discount may given based on quantity or value or both. Let’s see how to create a discount ledger for goods.

Discount ledger creation  for stock item for composition accounting

Go to Gateway of Tally > Accounts Info. > Ledgers > Create.

GST Composition stock item

In the under field select direct expense or indirect expense if you want to allow discount in the sales invoice and select direct income or indirect income if you want to enter discount in the purchase invoice.

Type: of ledger: Discount

Press enter key to save the screen.

Discount ledger creation of services for composition dealer

Go to Gateway of Tally > Accounts Info. > Ledgers > Create.

Discount edger for service composition

select indirect expense or income in the under field

Make sure that TYPE OF LEDGER is selected Not Applicable.

Is GST applicable: Not applicable.

Include in assessable Value calculation for :GST

Appropriate to :Services.

Press enter and save the screen

How to Pass sales transactions under composition scheme

Composite dealers are allowed to sell within the state they are registered. Cannot make any interstate sale.Composite dealer is not allowed to collect the tax in the invoice. They can sell Local Unregistered, local registered, local composition  & to end customers.All the sales transactions are passed in the same way.

Sale to local Registered dealer.

When a GST composition dealer is selling goods to local registered dealer, No tax can be charged to the bill,he cannot issue a tax invoice and can only issue bill of supply.Let’s take the following example of sale entry .

Sold 10 No Aluminium ladder @ 4425/no ,Discount allowed is 4250

To pass composite sale entry  go to

Gateway of Tally>Accounting Vouchers>F8 Sales

Party A/c Name: Enter party name ( sundry debtor) local registered dealer ledger here.

Sales Ledger: Select the ledger created for composition.

Select stock item,,enter quantity,rate.

For providing discount,enter twice ,select discount ledger created;and  in the amount column  type (-) amount for example -2250.

sale to a local registered dealer

Press enter and save.

How to print bill of supply & change the title and sub title of invoice

After saving sales voucher

  1. Press Alt + P to open the print screen.
  2. print dialogue box
  3. Click F12: Configure.
  4. Bill of Supply will display automatically, and enter Composite Dealer Not Eligible to Collect Tax in the field Sub Title (if any), as shown below:

bill of supply title changing

4.Change any other details if you want in the configuration screen and save the configuration by pressing enter or shortcut key Ctrl+A.

Now you will back to print dialogue box, press enter or click on Yes,The composition invoice will have started printed.

bill of supply for composition dealer

Sale to local unregistered dealer

Sale to unregistered dealer is just similar to the above, no need to input any tax details.

sale to local unregistered

Sale to local composition dealer

This is also the same, here is an entry for your reference.

sale to local composition customer

How to enter Purchase Invoice of composition dealer.

As explained earlier let’s learn the purchase entry of composition dealer bought  goods and services from different types of suppliers of GST.

Purchase from local composition dealer

As you know, the composition dealer cannot charge any tax in the invoice.Hence purchase from a composition dealer is non taxable. Meaning no taxes are included in the purchase invoice. While entering invoice, you won’t need to include any tax ledger.See below example

50 Nos aluminium ladders are purchased from a local composition dealer @ 4000/ no

Accounting Voucher > F9 Purchase

Purchase from local composition dealer

Purchase from a local registered dealer

As you know purchase from a local registered dealer includes GST tax ledger like CGST & SGST. let’s enter this example .

Purchase 10 No Aluminium Ladder @ 3900 + 9 % CGST & 9 % SGST.

Aluminum Ladder   10  No      3900                      39000

SGST                          9 %                                              3510

CGST                          9%                                               3510

Total                                                                      46020

This purchase invoice can entered as follows.

purchase from local registered dealer

Purchase from interstate registered supplier.

When purchase from an interstate supplier ,IGST is charged in the taxable invoice. Let’s see how to enter this purchase by a composition dealer.

Here is the voucher of purchasing from interstate registered supplier.

purchase from interstate registered dealer

Purchase from Local Un registered dealer

Now that you have to enter a purchase from local un registered dealer. Unregistered dealer do not charge any tax in the invoice, But a composition dealer purchasing from unregistered dealer is attracting reverse charge ,That is purchasing a supply from unregistered dealer is liable to pay tax by the purchaser in the normal rate of supply.

In the stock item creation, you have activate the option

Set/alter GST details: Yes

In the GST Details screen.

Is reverse charge applicable: Yes

While making entry you don’t need to do any thing, just enter the purchase invoice without tax as shown below. The system will automatically detect that it is a reverse chargeable entry and displayed in the return.

Purchase from unregistered dealer

GSTR- 4 ,The composition dealer quarterly return.

GSTR-4 is the quarterly return of composition dealer, filed through GST Portal. In tally erp 9 you will Find GSTR-4 Report in

Display >Statutory Reports> GST> GSTR-4

GSTR-4 Report

You can file GSTR-4 Using tally erp 9. by exporting the report to json format.

GST Composition accounting & create bill of supply in tally erp9
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One thought on “GST Composition accounting & create bill of supply in tally erp9

  1. In composition dealer gst payment entery what kind of ledger he prepare??
    Ledger name : tax payment
    Group. : Direct Expanse

    Is it true??

    Reply

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