When creating invoices that include products with varying tax rates, it’s crucial to calculate the taxes correctly. Issues can arise when both taxable and non-taxable products are combined, especially when you try to apply GST across the total value.
Example:
In the screenshot below, you’ll notice two products:
- Bag – ₹540 with 18% GST, total of ₹637.2.
- Raincoat – ₹400 with 0% GST, so the total is ₹400.
Correct Tax Calculation Breakdown
- Total Taxable Amount (pre-tax): ₹540 (bag) + ₹400 (raincoat) = ₹940
- GST on taxable products: ₹97.2 (applied only to the bag with 18% GST)
- Total with tax: ₹637.2 (bag total) + ₹400 (raincoat total) = ₹1,037.2
Important Note:
As per GST regulations, even if a product has 0% GST (like the raincoat), it still needs to be included in the total taxable amount for calculation purposes. The GST is applied only to the taxable items (like the bag in this example).