Whenever you accept a payment, we calculate a fee on the transaction. Once the fee is calculated, we proceed to calculate any applicable taxes (GST) on the fees that we have calculated.
Here is an example of how it works:
If your fee is Rs. 1.23, and
- You are based in Karnataka (which is where we are based), we will calculate your CGST / SGST taxes thus:
- At 9% of the fees: 1.23 * 9% = 0.1107
- Round up the calculated number to the next upward paisa (since we can neither pay the government nor pay you numbers that are fractions of a paisa): 0.12
- Add all the taxes (CGST 0.12 + SGST 0.12 ): 0.24
- If you are based outside of Karnataka, we will calculate IGST thus:
- At 18% of the fees: 1.23 * 18% = 0.2214
- Round up the calculated number to the next upward paisa: 0.23
- Add all the taxes (IGST only): 0.23
Now, if you receive 100 payments over the month, where the fee for each payment is Rs. 1.23, then you will be charged a total tax of:
- If you're based in Karnataka: Rs. 24 (which is 100 * 0.24)
- If you're based outside of Karnataka: Rs. 23 (which is 100 * 0.23)
When we prepare your tax invoice at the end of the month, we simply add up the fees and taxes calculated per transaction.
FREQUENTLY ASKED QUESTIONS
- Why only round up? Why not round down?
We ensure that we never underpay taxes to the government, hence we never round down. On the other hand, our fees go through half-even rounding, where we end up, on average, not making any additional money due to rounding.
- Does Instamojo profit from this rounding?
No, the taxes are deposited at actuals with tax authorities.
- Can I get the excess tax charged back?
You may claim the actual taxes charged (whether excess or not) as an input credit to your payable taxes. Please speak to your tax advisor about this.