Rounding Off Tax under GST

Under normal business scenarios, a taxpayer usually comes across a situation when the amount of tax payable comes out to be in decimals. In such situations, a very interesting question arises “What is the tax amount payable?”.

To avoid difficulties in calculation of tax payable and facilitate ease of payment of tax, section 170 of the CGST Act talks about rounding off of tax. Traditionally, businesses used a variety of methods such as normal rounding, upward rounding, and downward rounding. But, again it is very important to understand which is the correct method of rounding off tax under the GST law.

Methods of Rounding Off Tax

Traditionally, businesses used the below three methods for rounding off of tax liability:

1. Upward rounding off of tax liability: Under this method, the value of paise is always rounded upwards to the nearest rupee. For example, if the tax liability comes out to be Rs.10.40, then it is rounded off to Rs.11.
2. Downward rounding off of tax liability: Under this method, the value of paise is always rounded downwards to the nearest rupee. For example, if the tax liability comes out to be Rs.10.70, then it is rounded off to Rs.10.
3. Normal rounding off of tax liability: Under this method, the value of paise is rounded upward/downward depending upon the below two situations-
   • If the value of paise is greater than or equal to 50: It is rounded upwards to the nearest rupee.
   • If the value of paise is less than 50: It is rounded downwards to the nearest rupee.

How to Round Off under GST?

As per Section 170 of the CGST Act, the correct method of rounding off is normal rounding. So, all the amounts of tax, interest, penalty, refund, or any other amount payable should be rounded off to the nearest rupee as per normal rounding off of tax liability method.

Rounding Off GST for Multiple Invoices

After determining the correct method of rounding, a very important question arises – Whether the rounding off should be done for an individual invoice or on a consolidated basis? The answer to this question is that rounding off of tax liability should be done on an individual invoice because the tax is payable on each invoice. Further, rounding off should be done for each part of the tax liability, i.e. separate rounding off for CGST, SGST or IGST, etc.