Getting Tally Prime installed is only the beginning. For it to work as a compliant GST accounting system — generating valid e-Invoices, populating GSTR-1 accurately, and handling TDS correctly — Tally Prime must be configured correctly from the first day.
This guide walks through the complete GST and e-Invoicing setup in Tally Prime, step by step. It covers GSTIN configuration, enabling e-Invoicing, GSTR-1 and GSTR-3B workflows, e-Way bills, TDS/TCS setup, and common errors businesses run into.
If you would prefer to have an authorised Tally Prime partner handle this setup professionally, Cloudfy Systems configures Tally Prime for GST compliance as part of every deployment.
Prerequisites Before You Begin
Before configuring GST in Tally Prime, ensure you have:
- Active Tally Prime licence with TSS (Tally Software Services) — e-Invoicing requires active TSS
- GSTIN (Goods and Services Tax Identification Number) of your business
- HSN/SAC codes for your products and services
- State code for your registered address
- IRP (Invoice Registration Portal) credentials — used for e-Invoicing API authentication
- TDS applicability determination — which payments attract TDS for your business category
Step 1: Create Your Company in Tally Prime
When you first open Tally Prime, the first step is creating your company.
Path: Gateway of Tally > Create Company
Key fields to fill correctly:
- Name: Your company's legal name exactly as per GST registration
- Address: Registered address as per GST registration
- Country: India
- State: Your state — this determines the state code in tax ledgers (e.g., Delhi = 07, Maharashtra = 27, UP = 09)
- PIN Code: Your registered PIN code
- Financial Year begins from: April 1 (India financial year)
- Books beginning from: Start date for your accounting entries
After saving, you will be taken to the Gateway of Tally for this company.
Step 2: Enable GST Features in Tally Prime
Path: Gateway of Tally > Features (F11) > Accounting Features
Set the following:
- Enable Goods and Services Tax (GST): Yes
Then go to: Gateway of Tally > Features (F11) > GST Features (or Statutory Features)
Configure:
- Enable GST: Yes
- State: Your state (auto-fills from company settings)
- Applicable from: Date from which GST applies to your books
- Periodicity of GSTR filing: Monthly or Quarterly (based on your GST registration)
- Enable e-Invoicing: Yes (if your turnover exceeds the applicable threshold — currently ₹5 crore+ for mandatory e-Invoicing)
Step 3: Set Up GST Registration Details
Path: Gateway of Tally > Masters > Ledger > (Select your company's GSTIN ledger) OR directly via F11 > GST Details
In the GST Details screen:
- GSTIN: Enter your 15-digit GSTIN exactly (e.g., 09AAOFC1060G1ZK)
- Registration Type: Regular (most businesses) or Composition
- Enable e-Invoicing: Yes (if applicable to your turnover)
Verify the GSTIN format: State Code (2 digits) + PAN (10 digits) + Entity Number (1 digit) + Z (default) + Check Digit (1 digit).
Step 4: Create GST Tax Ledgers
Tally Prime needs tax ledgers for CGST, SGST and IGST to post tax amounts correctly on invoices and in your books.
Path: Gateway of Tally > Create (Alt+C) > Ledger
Create CGST ledger:
- Name: CGST
- Under: Duties & Taxes
- Type of Duty/Tax: GST
- Tax Type: Central Tax
Create SGST ledger:
- Name: SGST
- Under: Duties & Taxes
- Type of Duty/Tax: GST
- Tax Type: State Tax
Create IGST ledger:
- Name: IGST
- Under: Duties & Taxes
- Type of Duty/Tax: GST
- Tax Type: Integrated Tax
Create CESS ledger (if applicable): For products attracting GST Compensation Cess (e.g., tobacco, luxury goods):
- Name: GST Cess
- Under: Duties & Taxes
- Type of Duty/Tax: GST
- Tax Type: Cess
Step 5: Set Up Stock Items with HSN Codes
Every product or service in Tally Prime must be linked to its correct HSN code (for goods) or SAC code (for services) for accurate GSTR-1 and HSN-wise summary reporting.
Path: Gateway of Tally > Masters > Stock Item > Create (or Alter to edit existing)
For each stock item:
- HSN/SAC Code: Enter the 4, 6 or 8-digit HSN code (e.g., 8471 for computers, 6203 for garments)
- GST Rate: Applicable rate — 0%, 5%, 12%, 18% or 28%
- Taxability: Taxable (for standard rated goods), Exempt, or Nil Rated
You can also assign default HSN codes at the stock group level so all items in the group inherit the same code — useful for businesses with large product catalogues where most items fall in the same HSN range.
Step 6: Configure Party Ledgers (Customers and Vendors)
All customer and vendor (supplier) ledgers must have GSTIN details for B2B transactions and for accurate GSTR-1 classification.
Path: Gateway of Tally > Masters > Ledger > (Select party ledger) > Alter
For each customer/vendor:
- GSTIN/UIN: Their GSTIN (for registered businesses)
- Registration Type: Regular, Unregistered, Consumer, Composition, Overseas (for exports)
- Country, State: For inter-state vs intra-state tax determination
Important: Tally Prime determines whether to apply CGST+SGST (intra-state) or IGST (inter-state) based on the supplier's state versus the buyer's state. If party states are not configured correctly, your tax amounts will be wrong.
Step 7: Enable e-Invoicing in Tally Prime
e-Invoicing (generating IRN from the IRP) requires:
- Active TSS subscription
- e-Invoicing enabled in company GST settings (Step 2)
- IRP portal credentials configured
Path: Gateway of Tally > Features (F11) > GST Features > e-Invoicing Details
Enter:
- Enable e-Invoice: Yes
- IRP portal username: Your GST portal username
- IRP portal password: Your GST portal password
Tally Prime uses this to authenticate with the IRP API and generate IRN in real time when you save a sales invoice.
How e-Invoicing Works in Tally Prime
When you create a sales invoice in Tally Prime (after e-Invoicing is enabled):
- You enter the invoice as normal — party, items, quantities, rates
- When you save (Ctrl+A), Tally Prime sends the invoice data to the IRP in real time
- IRP validates the data and returns an IRN (Invoice Reference Number) and a QR code
- Tally Prime embeds the IRN and QR code in the invoice
- Your printout includes the IRN, QR code and acknowledgement number — making it a valid e-Invoice
If the IRP is unavailable (IRP downtime), Tally Prime saves the invoice locally and queues it for IRN generation once connectivity is restored.
When is e-Invoicing Mandatory?
As of current regulations:
- Businesses with annual turnover above ₹5 crore in any previous financial year must generate e-Invoices
- The turnover threshold has been progressively reduced since e-Invoicing was introduced in 2020
Check the current threshold with your CA or the GSTN portal as regulations continue to evolve.
Step 8: Generate GSTR-1 in Tally Prime
GSTR-1 is the monthly or quarterly outward supply return. Tally Prime auto-populates this from your sales invoices.
Path: Gateway of Tally > Reports > GST Reports > GSTR-1
The GSTR-1 report in Tally Prime shows:
- B2B invoices — registered buyer transactions
- B2C Large invoices — unregistered buyers with invoice value above ₹2.5 lakh (inter-state) or ₹1 lakh (intra-state)
- B2CS — small B2C transactions
- Exports
- Credit/Debit Notes
- Nil-rated, Exempt and Non-GST supplies
- HSN-wise summary
Verification before filing: Always reconcile your GSTR-1 in Tally with your GSTR-2A (auto-populated purchase data) before filing. Mismatches create ITC reconciliation problems for your buyers.
Exporting GSTR-1 for filing:
- Option 1: Export the JSON file from Tally Prime and upload to the GST portal manually
- Option 2: Use Tally's GST portal integration (if configured) to push directly
Step 9: Prepare GSTR-3B in Tally Prime
GSTR-3B is the summary return filed monthly (or quarterly under QRMP scheme). It captures:
- Total outward taxable supplies
- ITC (Input Tax Credit) available
- Net tax payable
Path: Gateway of Tally > Reports > GST Reports > GSTR-3B
Tally Prime computes the GSTR-3B figures automatically from your books. Before finalising:
- Verify ITC figures match purchase entries in your books
- Check for any blocked ITC (ineligible under Section 17(5))
- Confirm reverse charge entries are captured
Tally Prime's GSTR-3B output gives you the figures to enter in the GSTN portal. As of current versions, you export the data and enter it on the portal manually (Tally's direct filing capability depends on version and configuration).
Step 10: e-Way Bill Generation in Tally Prime
For goods movement above ₹50,000 value, an e-Way bill is mandatory. Tally Prime generates e-Way bills directly from delivery notes or invoices.
Path: When creating a sales invoice or delivery note, Tally Prime includes an e-Way Bill section at the bottom.
Fill in:
- Transporter Details: Transporter GSTIN and transporter ID
- Vehicle Number: Vehicle registration number
- Mode of Transport: Road, Rail, Air, Ship
- Distance: Approximate distance in km
After saving the document with these details, Tally Prime sends the request to the e-Way bill portal and embeds the EWB number on the document.
Note: e-Way bill generation also requires active TSS and internet connectivity. Like e-Invoicing, requests queue if the portal is temporarily unavailable.
Step 11: TDS Setup in Tally Prime
TDS (Tax Deducted at Source) applies to many business payments — contractor payments, rent, professional fees, salary, commission and more.
Path: Gateway of Tally > Features (F11) > Statutory & Taxation > Enable TDS: Yes
Create TDS Duty Ledgers: For each TDS section you use:
- Section 194C (Contractors/Sub-contractors)
- Section 194J (Professional/Technical Services)
- Section 194I (Rent)
- Section 194H (Commission)
For each section, create a ledger:
- Name: TDS @ 194C (or appropriate section)
- Under: Duties & Taxes
- Type of Duty/Tax: TDS
Setting TDS on Party Ledgers: For vendors subject to TDS, in the party ledger:
- Set TDS Applicable: Yes
- TDS Nature of Payment: Select applicable section (194C, 194J, etc.)
- TDS Deductible at lower rate: If the vendor has a lower deduction certificate
TDS Entry in Tally Prime
When you make a payment to a TDS-applicable vendor:
- Create a payment voucher
- Select the vendor (party ledger)
- Tally Prime automatically calculates TDS based on the configured section and rate
- The TDS amount is deducted from the payment and credited to your TDS liability ledger
TDS Returns in Tally Prime
Tally Prime generates Form 26Q (for non-salary TDS) and Form 24Q (for salary TDS) from your TDS entries. You can export these in the format required for filing on the TRACES portal.
Common Tally Prime GST Errors and Fixes
Error: "IRN generation failed — GSTIN not registered for e-Invoice"
Cause: Your GSTIN is not enrolled for e-Invoicing on the IRP portal. Fix: Log in to the GST e-Invoice portal (einvoice1.gst.gov.in) and register your GSTIN for the e-Invoice API. This is a one-time registration separate from your regular GST registration.
Error: "GSTR-1 data mismatch — invoice not reflecting"
Cause: Invoice is not correctly tagged as a GST transaction, or the party ledger does not have GSTIN configured. Fix: Check that the sales ledger uses the correct GST type (Taxable), and verify the party ledger has GSTIN populated with the correct registration type.
Error: "TDS amount not calculating automatically"
Cause: TDS is not enabled for the party, or the TDS section is not set in the party ledger. Fix: Open the party ledger (Alter), set TDS Applicable = Yes, and select the correct TDS Nature of Payment.
Error: "e-Way bill not generating — vehicle number format error"
Cause: Vehicle number must be in the format AA00AA0000 (state code + digits + letters + digits). Fix: Enter the vehicle number without spaces or hyphens in the standard Indian registration format.
Error: "HSN summary showing 'Unknown' in GSTR-1"
Cause: Stock items do not have HSN codes assigned. Fix: Alter each stock item (or stock group) and assign the correct HSN/SAC code. Recheck GSTR-1 after correction.
Annual GST Audit and Year-End in Tally Prime
At the end of the financial year, Tally Prime assists with:
- GSTR-9 (Annual Return): Auto-populated from your GSTR-1 and GSTR-3B filings
- GSTR-9C (Reconciliation Statement): For businesses above ₹2 crore turnover, Tally Prime provides the reconciliation data needed for the CA's certification
- GST Audit Trail: Tally Prime's Edit Log maintains an audit trail of all voucher modifications, which satisfies GST audit requirements for audit trail maintenance
Frequently Asked Questions — Tally Prime GST Setup
Q: Is Tally Prime TSS mandatory for e-Invoicing? A: Yes. IRN generation via the IRP API requires an active TSS subscription. Without TSS, your Tally installation cannot communicate with the IRP portal.
Q: Can I configure Tally Prime for multiple GSTINs? A: Yes. Each company in Tally Prime has its own GSTIN. Using the multi-company feature, you can manage several companies (each with a different GSTIN) from the same Tally Prime installation (Gold or Server edition recommended for multi-company).
Q: How do I handle zero-rated exports in GSTR-1 via Tally Prime? A: When creating export invoices, set the party type as "Overseas" and the supply type as "Export." Tally Prime classifies these in the Export section of GSTR-1 automatically.
Q: What is the Tally Prime Reconciliation feature? A: Tally Prime's Bank Reconciliation matches your accounting entries with your bank statement. For GST reconciliation (matching your GSTR-2A with your purchase register), Tally Prime provides a separate ITC reconciliation report under GST Reports.
Q: Does Tally Prime handle RCM (Reverse Charge Mechanism) transactions? A: Yes. For purchases subject to RCM, you create the purchase entry and manually set the RCM liability. Tally Prime posts the tax amount to your liability ledger rather than as ITC — consistent with RCM treatment under GST law.
For professional Tally Prime GST configuration — including GSTIN setup, e-Invoicing, GSTR-1 mapping and TDS configuration — handled by an authorised Tally Prime partner in India, contact Cloudfy Systems at +91 97600 50555 or reach us here.