Issues in Calculating Tax Amounts in GST Returns

February 23, 2021

Recently, the Government’s GST Common Portal, added stricter validation of Taxable value and Tax Amounts while filing GSTR-1 – Return of Outward Supply. We explain this issue in a Q&A Format.

What validation of Tax Rates and Amounts does the GST Common Portal perform?

The portal validates that the tax amounts are in line with the Taxable Value and Tax Rate to the last paisa.

For example, with a Taxable Value of INR 24.63 and a GST Tax Rate of 18%, the CGST and SGST Amounts for Intra-State supply must be reported as INR 2.22 (i.e. 24.63 x 9 / 100 = 2.2167), while the IGST Amount for Inter-State supply must be reported as INR 4.43 (i.e. 24.63 x 18 / 100 = 4.4334).

The Government Portal will not accept any other value, even if there is a difference of 1 paisa.

When does this validation take effect?

This check takes effect from 00:00:01 hours on February 23, 2018.

What error message does the Government Portal report?

You will see the message

Tax amounts are not in line with the taxable value and the declared tax rate(Tax rate percentage). Please edit the tax amount or taxable value.

Does this mean reported tax could be different from the tax shown in the Invoice?

Yes. The rounding (to the paisa) that the Government Portal expects is different from the rounding that businesses follow while issuing Invoices. Businesses use one of the following methods

  1. Add tax amounts in all line items of an Invoice and then round the final result
  2. Round each line item’s tax amount and add them all

However, the Government Portal expects the tax payer to add tax amounts for line items (rate-wise) and then round the result to the nearest paisa.

1) Round only the final Invoice Tax Amount
GST Rate Taxable value CGST Amount SGST Amount
18% 603.6 54.32 54.32
18% 704.38 63.39 63.39
12% 1,183.05 70.98 70.98
12% 342.55 20.55 20.55
Total 2,833.58 209.25 209.25
2) Round the tax amount in each line item
GST Rate Taxable Value CGST Amount SGST Amount
18% 603.60 54.32 54.32
18% 704.38 63.39 63.39
12% 1,183.05 70.98 70.98
12% 342.55 20.55 20.55
Total 2,833.58 209.24 209.24
The Invoice to be reported in the GSTR-1 Return
GST Rate Taxable Value CGST Amount SGST Amount
18% 1,307.98 117.72 117.72
12% 1,525.60 91.54 91.54
Total 2,833.58 209.26 209.26

How should we report taxes in the B2C section of GSTR-1?

The B2CS section (small B2C Invoices) of the GSTR-1 Return is an aggregate sum of all Invoices and Credit Notes. The usual practice is to add the Tax Values (CGST and SGST or IGST) printed in each Invoice and report the total.

This practice is not acceptable to the Government Portal. One must now add all the un-rounded tax values, rate-wise, state-wise, and then round the total (to the paisa).

As an example, consider that we have a B2C Invoice with a taxable value of INR 12.53 and IGST Rate of 18%. The Tax Amount of this Invoice is INR 2.26 (12.53 x 18 / 100 = 2.2554). If the taxpayer has issued 100 such Invoices, the taxable value will be INR 1,253 and IGST Amount will be 226. However, while reporting in the Tax Return, the Government Portal expects the tax payer to report an IGST Amount of INR 226.54.

Does GSTZen validate Input values that are uploaded?

GSTZen’s Sales Invoices XLS uploader validates inputs for each line. Users would have seen an error message such as the following when entering details with Tax Values not in line with input.

Screenshot of error message

Note that, even with this input validation, the GSTR-1 returns data has to generated differently for different sections. GSTZen’s GSTR-1 Return filing module handles these issues for you automatically.

There could be slight difference between your Books of Accounts and the GSTR-1 Return. This is unavoidable.

Do we have to provide separate IGST, CGST, ISGT Values to GSTZen Uploader or can we provide only taxable value and tax rate?

GSTZen’s Sales Invoices XLS uploader accepts both methods of specifying tax values. You can provide either the Taxable Value and GST Rate, or you can provide Taxable value and Individual Tax Amounts and Rates.

Screenshot of Uploader Column Mapping

Is there a validator where can check if the Returns JSON file is valid?

Yes. We, at GSTZen, have built a simple validator for you. Upload your GSTR-1 JSON file (either generated using the Offline Tool or other software) and you will see a report showing errors in your JSON. As a bonus, GSTZen will automatically correct the JSON file for you.

Note that GSTZen only checks some details of the JSON and cannot check all errors. Confirming that a GSTR-1 JSON is valid can be done only by uploading it in the Government portal.