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In business, it is quite common to face scenarios where the value of tax turns out to be in decimals. In such cases, the question naturally arises as to how much tax values should be treated. Conventionally, businesses use a variety of methods, which include both rounding up and down, as well as normal rounding. However, it is important for businesses to understand the right method to round-off tax values in the GST era, as specific provisions have been laid down for the same. Given below is an understanding of prevalent tax rounding methods, followed by GST rounding rules to be followed to handle tax values in the GST era.
Businesses will generally use any of the following tax rounding methods:
In this type of rounding, if the value in Paise is 50 Paise or more, it is rounded upward to the nearest Rupee, and, if the value in Paise is less than 50 Paise, it is rounded downward to the nearest Rupee.
In this type of rounding, the value in Paise is always rounded upward to the nearest Rupee.
In this type of rounding, the value in Paise is always rounded downward to the nearest Rupee.
The GST Council has been speculative about whether, in GST, round up or down would be the right method. After much deliberation, the method which has been finalised for GST rounding adjustment in GST invoices is normal rounding, i.e. if the value in Paise is more than 50 Paise, it should be rounded upward to the nearest Rupee and if the value in Paise is less than 50 Paise, it should be rounded downward to the nearest Rupee.
This GST calculation rounding method will be used to compute the value of tax, interest, penalty, fine or refund. Hence, taxpayers should ensure that values of tax, interest, penalty, etc. are rounded off using the normal rounding method.
If the assessee has raised multiple invoices, then the rounding off is to be made for the consolidated amount of tax or for the tax amount mentioned in each invoice?
In some cases, a taxpayer may be liable to pay tax on multiple invoices. The amount mentioned in each invoice might be in decimals, and the sum total tax payable amount might also be in decimals. In this case, the question arises, as to whether the rounding off needs to happen individually or in a consolidated fashion.
In such cases, the rules specify that rounding off must be made for the tax payable under the respective Act. Thus, It applies to each invoice, since tax is payable on each invoice. Further, the rounding off must be made for each part of the tax payable i.e. separate rounding off for CGST and SGST.
Payment Declaration Form – GST PMT – 08: Definition, Format and Rules