Rounding Off Tax under GST

Shubhangi Jain

19 Jan, 2023

There are instances during the ordinary course of business where the amount of payable tax is a decimal value which confuses the assessee regarding the actual tax required to be paid in such cases. The CGST Act provides for the provision of rounding off of tax in order to avoid any difficulties pertaining to the calculation of the payable tax by the assessee through various methods. The present article discusses the concept of rounding off tax under GST along with its related aspects. 

What Is Rounding Off Tax Under GST?     

Section 170 of the CGST Act states that The amount of tax, penalty, interest, fine or any other sum to be paid and the amount of refund or any other sum payable, as per the provisions of this Act should be rounded off to the nearest Rs. and, where such an amount contains a part of a Rs comprising of paise, then, if such part is 50 paise or exceeds the same, it shall be increased to Rs.1 and if the such part doesn’t exceed 50 paise it shall be ignored.

Methods of Rounding off Tax 

Tax liability can be Rounded Off through the below-mentioned methods 

Upward

The value of paise is rounded upwards to the nearest Rs under this method. For instance, if the tax liability comes out to be Rs.10.41, then it is rounded off to Rs.11.

Downward 

As the name suggests, the value of paise is rounded downwards to the nearest Rs as per this method. For example, if the tax liability comes out to be Rs.10. 80, then it is rounded off to Rs.10.

Normal 

Here the value of paise is rounded upward/downward depending upon the below two situations-

• If the value of paise >= 50: It is rounded upwards to the nearest rupee.
• If the value of paise <= 50: It is rounded downwards to the nearest rupee.

Which is the Best Method?

As per Sec- 170 of the CGST Act, the best method for this is normal rounding-off method. Therefore all the amounts of tax, refund penalty, interest, or any other amount payable must be rounded off to the nearest rupee according to normal rounding off of the tax liability method.

Rounding Off GST for Multiple Invoices

Subsequent to the determination of the correct method, the next question that arises in the minds of the assessee is the basis of rounding off the tax, ie if for an individual invoice or consolidated basis. The answer to the same is that rounding off of tax must be done on an individual invoice as the tax is payable on each invoice. Further, rounding off must be made for each part of the tax, i.e. separate rounding off for SGST, CGST, or IGST^[1], etc.

Conclusion

The CGST Act has quite mutinously dealt with the matters related to the payment of GST by the assessee, and the concept of rounding off tax is a great example of the same. Such a practice can avoid inconsistencies in GST payment and safeguard the assessee from any unnecessary legal hurdles.

Read Our Article: Understanding Advance Tax and Penalty Under Advance Tax