Understanding the Rounding Process for India Taxes

All government taxes must be rounded to the nearest applicable unit. You must define this unit for a combination of tax type and tax regime. The system stores the rounded tax amounts in the Tax Groups-IND-00 table (F75I005).

The system calculates taxes when you enter sales orders, but the rounding is done when you generate the invoice. The rounding applies to each tax type and the Invoice Print program uses rounded amounts to calculate the invoice total. The customer pays the rounded invoice total. The rounding difference does not print on the invoice nor does it appear in the general ledger. You must account for the tax liability at the rounded-off level.

This example shows how the system calculates an unrounded amount of 115 with the rounding value of INR 10:

• Divides amount by the rounding value: 115 ÷ 10 = 11.5

• Rounds amount to zero decimal places: 12

• Multiplies rounded value and rounding value to derive the rounded amount: 12 ×10 = 120

Each state defines the rounding rules for its taxes. Like the Central Government requirement, most state regulations permit rounding up to the nearest rupee on the invoice total. The rounding difference is added to or reduced from the total tax liability that is billed to the customer and paid to the tax authority. You are not required to show the taxes at the line level. You can distribute the rounding difference to the tax calculated by line or to the general ledger and accounts receivable.

An invoice generated by a dealer does not round excise taxes because the excise duty on components shipped is allocated to the shipment, based on matching the shipment to a receipt. The dealer price includes the excise duty.