How to calculate GST payable: worked examples with ITC set-off, reverse charge and cash ledger
Step-by-step GST payable calculations for small businesses in India, CGST, SGST and IGST, the order of ITC set-off, reverse charge, the 1% cash rule and how to check software output.
GST payable for a period is output tax on your supplies minus eligible input tax credit, worked out separately for IGST, CGST and SGST and set off in the order the rules require, plus any reverse charge tax, which must always be paid in cash. If the credit ledger cannot cover the liability, the balance is paid from the electronic cash ledger through a PMT-06 challan. This guide shows the calculation step by step so you can check what your software or accountant puts into GSTR-3B.
This is the overview for the calculations section. It links to the late fee and interest calculation, the GSTR-9 annual return guide, ITC reconciliation with GSTR-2B, annual compliance cost examples, choosing GST software and the monthly GST filing checklist. All figures are illustrative.
Step 1: work out output tax
For each invoice, GST = taxable value × rate. For a supply within your state the tax is split equally into CGST and SGST (or UTGST); for an inter-state supply, or an export or SEZ supply with payment of tax, it is IGST.
Example. A Bengaluru electronics trader in October 2026:
| Supply | Taxable value | Rate | CGST | SGST | IGST |
|---|---|---|---|---|---|
| Sales within Karnataka | ₹6,00,000 | 18% | ₹54,000 | ₹54,000 | — |
| Sales to Tamil Nadu buyers | ₹4,00,000 | 18% | — | — | ₹72,000 |
| Sales within Karnataka at 5% | ₹1,00,000 | 5% | ₹2,500 | ₹2,500 | — |
| Total output tax | ₹56,500 | ₹56,500 | ₹72,000 |
Credit notes issued in the month reduce output tax; debit notes increase it.
Step 2: work out eligible ITC
Only credit that meets the conditions of section 16 and appears in GSTR-2B (after your IMS actions) can be claimed. Exclude blocked credits under section 17(5), such as most motor cars and food and beverages for staff, and reverse ITC where required (for example on supplier invoices unpaid for over 180 days).
Continuing the example, eligible ITC from GSTR-2B:
| Source | CGST | SGST | IGST |
|---|---|---|---|
| Purchases from Karnataka suppliers | ₹30,000 | ₹30,000 | — |
| Purchases from Maharashtra suppliers | — | — | ₹95,000 |
| Eligible ITC | ₹30,000 | ₹30,000 | ₹95,000 |
Step 3: set off in the right order
The rules (section 49 and rule 88A of the CGST Rules) require:
- IGST credit is used first against IGST liability, and then against CGST and SGST in any order or proportion. IGST credit must be fully used before CGST or SGST credit is used.
- CGST credit is used against CGST, then IGST. It can never be used against SGST.
- SGST credit is used against SGST, then IGST (only after CGST credit). It can never be used against CGST.
Applying it.
- IGST credit ₹95,000: first against IGST liability ₹72,000 → IGST liability nil, ₹23,000 IGST credit left. Use the remaining ₹23,000 against CGST and SGST; say ₹11,500 each.
- CGST liability ₹56,500 − ₹11,500 (IGST credit) = ₹45,000; less CGST credit ₹30,000 → ₹15,000 CGST payable in cash.
- SGST liability ₹56,500 − ₹11,500 = ₹45,000; less SGST credit ₹30,000 → ₹15,000 SGST payable in cash.
Total cash payable: ₹30,000. If the trader had applied the ₹23,000 balance entirely to CGST, CGST cash would be ₹3,500 and SGST cash ₹26,500: the same total, but splitting it evenly avoids leaving unused SGST or CGST credit stranded when the next month's mix is different. Good software lets you choose the split.
Step 4: add reverse charge and other cash-only items
Tax payable under reverse charge (for example on services of a goods transport agency, legal services from an advocate to a business, or notified supplies from unregistered persons) must be paid in cash; you cannot use the credit ledger. You can then claim the same amount as ITC, normally in the same return.
Example. The trader used a goods transport agency for ₹40,000 at 5% under reverse charge = ₹2,000 (₹1,000 CGST + ₹1,000 SGST). Cash payable rises by ₹2,000 to ₹32,000; the ₹2,000 becomes ITC available for use (in the same GSTR-3B, if all conditions are met).
Interest, late fees and penalties are also paid only from the cash ledger.
Step 5: check the 1% cash rule (rule 86B)
Where the value of taxable supplies (other than exempt and zero-rated supplies) in a month exceeds ₹50 lakh, rule 86B generally requires at least 1% of the output tax liability to be paid in cash, with exceptions (for example where income tax above a threshold was paid in the previous two years, or where refunds above a limit were received). In the example, taxable supplies are ₹11 lakh, so the rule does not apply.
The full calculation at a glance
| Item | CGST | SGST | IGST | Total |
|---|---|---|---|---|
| Output tax (forward charge) | 56,500 | 56,500 | 72,000 | 1,85,000 |
| IGST credit used | (11,500) | (11,500) | (72,000) | (95,000) |
| CGST/SGST credit used | (30,000) | (30,000) | — | (60,000) |
| Cash for forward charge | 15,000 | 15,000 | 0 | 30,000 |
| Reverse charge (cash) | 1,000 | 1,000 | — | 2,000 |
| Total cash payable | 16,000 | 16,000 | 0 | 32,000 |
How to check your software's GSTR-3B draft
- Output tax in Table 3.1 should equal GSTR-1/1A for the period; since 2025 this liability is locked, so any mismatch must be fixed in GSTR-1A first.
- ITC in Table 4 should not exceed GSTR-2B except for items like reverse charge and imports, which have their own rows.
- Set-off on the payment screen should follow the order above; check how the IGST balance is split.
- Cash needed should match the challan you create.
The monthly GST filing checklist turns these checks into a routine.
Frequently asked questions
Why can't CGST credit be used for SGST?
CGST is a central tax and SGST a state tax; the law keeps them separate so that each government receives its share. IGST acts as the bridge because it is shared after settlement.
What if my ITC is more than my output tax?
The excess stays in the electronic credit ledger and is carried forward. A refund is possible only in specific cases, such as exports or an inverted duty structure.
Is GST calculated on the price including discounts?
Discounts shown on the invoice at the time of supply reduce the taxable value. Post-sale discounts reduce it only if the conditions in section 15 are met, generally through a GST credit note.
Do I pay interest if I file GSTR-3B late but have enough ITC?
Interest under section 50 is charged on the portion of tax paid in cash late. Tax set off from ITC is not subject to interest on that basis. See the late fee and interest guide.
Sources
- CBIC GST — sections 16, 17, 49 and 50 of the CGST Act; rules 36, 86B and 88A of the CGST Rules
- GST portal — GSTR-3B payment and set-off screens, PMT-06 challans
