Computation of GST Liability: formula sheet

Key formulas

Composite supply (Section 8(a))

Tax rate on whole bundle = rate applicable to the principal supply

Applies only when the items are naturally bundled in the ordinary course of business and one is the principal supply.

Mixed supply (Section 8(b))

Tax rate on whole bundle = highest rate among the individual items

Applies when items are supplied together for a single price but are not naturally bundled.

Tax liability

GST = value of the whole supply × applicable rate

Use one rate on the full bundle value. Do not split the price item by item.

Definition test

Naturally bundled + one main item = composite; otherwise single price package = mixed

Decide the classification first, then apply the rate rule.

Transaction value (s.15(1))

Value of supply = price actually paid or payable

Applies only if supplier and recipient are not related and price is the sole consideration.

Taxable value

Taxable value = Price + s.15(2) inclusions − s.15(3) eligible discounts

Add inclusions only if not already in the price.

GST payable on supply

GST = Taxable value × GST rate

The rate is CGST + SGST for intra-State supply, or IGST for inter-State supply.

Inclusions (s.15(2))

(a) other-law taxes charged separately; (b) supplier's liability borne by recipient; (c) incidental expenses incl. commission and packing; (d) interest, late fee, penalty for delayed payment; (e) subsidies linked to price, except Central/State Government subsidies

Remember them as five heads, a to e.

Post-supply discount test (s.15(3)(b))

Excluded only if: agreement at or before supply + linked to invoices + recipient reversed ITC

All three conditions must be met.

Related persons (Explanation)

Includes directors of each other's businesses, partners, employer-employee, 25% or more voting stock held in both, control, common control, family members, sole agent/distributor/concessionaire

If related, price may not be the transaction value; valuation rules apply.

Output tax

Output tax = Taxable value × GST rate

Intra-State: split into CGST and SGST (UTGST in a Union territory). Inter-State: all IGST.

Net GST payable

Net GST payable = Output tax (incl. reverse charge) − ITC utilised

Reverse charge tax cannot be paid from credit ledger. Pay it in cash.

Order for IGST liability

IGST credit first → then CGST credit and SGST credit left after their own heads are paid

IGST credit is used first on IGST liability. CGST or SGST credit goes to IGST only after CGST or SGST liability is paid.

Order for CGST liability

CGST: IGST credit balance after IGST is paid, then own CGST credit first, with any CGST credit left going to IGST

IGST credit may pay CGST. CGST credit pays CGST first, then IGST. SGST credit can never pay CGST.

Order for SGST liability

SGST: IGST credit balance after IGST is paid, then own SGST credit first, with any SGST credit left going to IGST

SGST credit pays SGST first, then IGST. CGST credit can never pay SGST.

Eligible ITC

Eligible ITC = Total input tax − blocked credit − credit not available (e.g. exempt use, apportioned)

Compute credit head wise, not as one pool.

General rule (Section 90)

Firm liable ⇒ Firm + each partner = jointly and severally liable

Applies to tax, interest or penalty, notwithstanding any contract to the contrary and any other law.

First proviso: retiring partner

Retired partner liable for dues up to the date of retirement (determined or not on that date)

Requires written intimation of the retirement date to the Commissioner by the partner or the firm.

Second proviso: late intimation

No intimation within 1 month of retirement ⇒ liability continues until the date the Commissioner receives the intimation

The one month runs from the date of retirement.

LLP treated as firm

LLP under the LLP Act, 2008 = firm (Section 94, Explanation)

So the Chapter's firm provisions extend to an LLP.

Section 146: purposes of the portal

Common Portal = registration + payment of tax + returns + computation and settlement of integrated tax + electronic way bill + other prescribed functions

Notified by the Government on the recommendations of the Council.

Section 49(1): deposits

Deposit (internet banking / credit or debit card / NEFT / RTGS / other prescribed mode) → electronic cash ledger

The date of credit to the Government's account in the authorised bank is the date of deposit in the ledger.

Section 49(2): input tax credit

Self-assessed ITC in return → electronic credit ledger

Credit ledger can be used only for output tax under the CGST or IGST Act (section 49(4)).

Section 49(5): ITC utilisation order

IGST credit: IGST, then CGST, then SGST/UTGST. CGST credit: CGST, then IGST. SGST/UTGST credit: SGST/UTGST, then IGST.

CGST credit cannot pay SGST/UTGST and SGST/UTGST credit cannot pay CGST. SGST or UTGST credit pays IGST only if CGST credit balance is not available for IGST.

Section 49(8): order of discharge

(a) self-assessed tax and dues of earlier periods; (b) self-assessed tax and dues of current period; (c) any other amount, including demands under section 73, 74 or 74A

Tax dues exclude interest, fee and penalty; other dues are interest, penalty, fee or any other amount.

Section 158A: consent

Sharing with notified systems needs supplier consent; recipient consent too for invoice and outward supply details

Sharing does not affect liability to pay tax.

Quick revision

• Composite supply: naturally bundled supplies, taxed at the rate of the principal supply.
• Mixed supply: bundled supplies that are not naturally bundled, taxed at the rate of the supply with the highest rate.
• Value of supply starts with the transaction value, meaning the price actually paid or payable when the parties are unrelated and price is the sole consideration.
• Check items added to value, such as incidental expenses and taxes other than GST, and items excluded, such as discounts allowed under the stated conditions.
• Output tax equals taxable value multiplied by the applicable rate.
• Intrastate supply attracts CGST and SGST; interstate supply attracts IGST.
• Net GST payable equals output tax less eligible input tax credit.
• Never take credit on blocked items or on ineligible purchases.
• Follow the prescribed order for using IGST, CGST and SGST credit.
• Partners of a firm are jointly and severally liable to pay tax, interest or penalty due from the firm.
• The common portal is used for registration, returns, payments and other furnishing of information.
• Show working step by step for step marks.

Common mistakes

• Treating a single-price bundle as composite just because items are sold together. Fix: Check natural bundling in the ordinary course of business. If none, it is mixed.
• Taking the highest rate for a composite supply. Fix: Composite means principal supply rate. Highest rate is only for mixed.
• Deducting every discount from the price. Fix: Check timing. Before or at supply, it must be recorded on the invoice. After supply, all three conditions of s.15(3)(b) must be met, including the ITC reversal.
• Adding packing or commission charges only when the question says 'extra'. Fix: Incidental expenses charged by the supplier, including commission and packing, are included under s.15(2)(c) if not already in the price.
• Setting off CGST credit against SGST liability, or SGST credit against CGST Fix: Remember the bar: CGST and SGST credits cross-utilise only through IGST, never directly.
• Using CGST or SGST credit on IGST before IGST credit is exhausted against IGST Fix: Always use IGST credit first on IGST liability, then on CGST or SGST.
• Saying each partner is liable only in proportion to profit share. Fix: Remember joint and several means the whole amount can be recovered from any one partner. Profit shares matter only between partners.
• Believing a clause in the partnership deed can limit liability to the department. Fix: Quote the words notwithstanding any contract to the contrary and any other law. The deed binds partners among themselves only.
• Saying the portal is set up by the GST Council. Fix: The Government notifies the portal, on the recommendations of the Council.
• Using the electronic credit ledger to pay interest or penalty. Fix: Credit ledger pays output tax only (Section 49(4)). Interest, penalty and fees need the cash ledger.

Exam tips

• Always write the classification (composite or mixed) and the reason before the rate. Step marks sit there.
• Quote Section 8 of the CGST Act in your answer, but cite sub-clauses only if you are sure of them.
• In MCQs, look for the words naturally bundled or single price to decide the class quickly.
• Remember that principal supply is decided by the nature of the transaction, not simply by value.
• Show the final split into CGST and SGST or IGST if the place of supply is given.
• In MCQs, hunt for the trap: a post-supply discount with a missing condition, or a Government subsidy that is not included.
• In written answers, name the sub-section for each addition or deduction. The reason often carries the mark.
• Always check the relationship of the parties first. A one-line statement on this earns marks.