Q.Using the figures from Worked Example 4, and assuming no other transactions occurred that month, pass the journal entries for

Input tax credit is set off against output tax liability of the same head first, and only the unmet balance is actually paid to the government. …

Step 1 — Identify the balances. From Worked Example 4: Input CGST = ₹3,600, Input SGST = ₹3,600 (from the purchase); Output CGST = ₹5,400, Output SGST = ₹5,400 (from the sale).

Step 2 — Set off input credit against output liability, head by head. CGST: Input ₹3,600 is set off against Output ₹5,400, leaving a CGST shortfall of 5,400 − 3,600 = ₹1,800. SGST: Input ₹3,600 is set off against Output ₹5,400, leaving an SGST shortfall of 5,400 − 3,600 = ₹1,800.

Set-off entry:

(Being input tax credit set off against output tax liability)

Step 3 — Pay the remaining balance in cash. After set-off, Output CGST shows a remaining balance of ₹1,800 and Output SGST shows a remaining balance of ₹1,800, a total of ₹3,600, which is paid to clear the liability.

Payment entry:

Set off same-head input credit against output liability first, then pay only the remaining balance; cross-check the net cash figure against …

A common mistake is paying the full output liability in cash without first passing the set-off entry, which double-counts the tax already covered by input credit. Another is set-off entries w …