Individual Tax Values and Invoice value need to be rounded to 2 decimal places in GST.
There is great deal of confusion about rounding of tax amount and invoice value under GST. This confusion stems from the fact that under Excise both tax values and invoice values were rounded to nearest rupee. Many experts interpret section 170 of CGST Act as equivalent of Section 37D of the Central Excise Act recommend rounding of tax and invoice value in excise. However this is not correct. Rounding of Tax and invoice value to 2 decimal places as done on GSTIN is correct interpretation of the law.
Rounding of Excise Invoices
Rounding of Excise Invoices is not based on Section 37D of the Excise Act which applies to rounding of actual tax, interest and penalty payable under the Act. This section is similar to Section 288 B of the Income Tax Act and applies to final tax, interest,penalty payable and does not affect individual transactions. Rounding of excise duty and invoice value required in Excise Act was based on Circular No 154/65/95-CX dated 17th October 1995 to prevent fraudulent claiming of modvat credit by fraudulently tampering duty amount. The same provision was contained in Para 9.1 of the Chapter 4 of the Invoice Manual.
Section 170 of CGST Act
The amount of tax, interest, penalty, fine or any other sum payable, and the amount of refund or any other sum due, under the provisions of this Act shall be rounded off to the nearest rupee and, for this purpose, where such amount contains a part of a rupee consisting of paise, then, if such part is fifty paise or more, it shall be increased to one rupee and if such part is less than fifty paise it shall be ignored.
Rounding only in final stage of Return
So the Section 170 of the CGST Act is like Section 37D of the Excise Act and therefore is only related to rounding at the time of payment of tax (in GSTR 3 or 3B). There is no mention of rounding off to nearest rupee in Revised Invoice Rules or under any circular. With invoice matching there is no possibility of fraudulent claiming of Input Tax Credit (equivalent of modvat). And therefore practice followed by GSTIN of rounding to 2 decimal places in GSTR-1 and 2 and rounding to nearest rupee in GSTR 3/3B is correct interpretation of law. And therefore there is no need of rounding of tax amount in invoice. Further RBI guidelines require rounding of interest and charges by banks only and banks are instructed to honour chequest issued upto 2 decimal places.
Rounding of Invoice Value for conveneince
However if businesses may want to round off invoices for convenience, then they should bring rounding off amount before computation of GST and not afterwards. Typically this will involve iterative computation (as KamatSoft eValueMax v10.0 does for GST rounding), but that is in our opinion correct position in law. Rounding amount is amount recovered for customer or discount given (when rounding is downward) to him on invoice and so it is part of the value of taxable supply of goods or services under Section 15 og CGST Act, 2017.