Ind AS 115 GST treatment
Under Ind AS 115 the transaction price excludes amounts collected on behalf of third parties, so Goods and Services Tax (GST) charged on an invoice is not revenue. GST is recorded as a liability to the government; only the net consideration is allocated to performance obligations and recognised as revenue.
Standard references
- Ind AS 115paragraph 47
- IFRS 15paragraph 47
- ASC 606606-10-32-2A (US election to exclude sales taxes)
Worked example
Illustrative: an INR annual subscription invoiced at ₹11,80,000 including 18% GST.
- Net consideration: ₹11,80,000 / 1.18 = ₹10,00,000. GST: ₹1,80,000 to GST payable (CGST and SGST for intra-state supplies, IGST for inter-state).
- Monthly revenue: ₹10,00,000 / 12 = ₹83,333.33 for months 1–11 (₹9,16,666.63).
- Month 12 absorbs the remainder: ₹10,00,000 − ₹9,16,666.63 = ₹83,333.37.
Result: ₹10,00,000 of revenue over 12 months; ₹1,80,000 never touches revenue.
Illustrative figures for explanation only, not taken from a real contract.
Common mistakes
- Allocating and scheduling the gross invoice amount including GST.
- Booking GST as revenue and then as an expense.
- Applying GST logic to US contracts, which carry no GST.
How Soluqube handles this
For INR contracts, Soluqube books the 18% GST to a liability and allocates and schedules only the net consideration. US contracts carry no GST.