What Is Output Tax?
Every tax invoice you raise carries a GST line at the bottom, and that line has a proper name in the law.
Output tax is the GST a registered business charges on the goods or services it sells. Section 2(82) of the CGST Act, 2017 defines it as the tax chargeable on a taxable supply made by a taxable person or by his agent, and it deliberately leaves out any tax the same person owes under reverse charge.
How Output Tax Is Calculated and Paid
The arithmetic is plain: taxable value multiplied by the rate that applies to the item.
Since 22 September 2025 most goods and services sit at either 5% or 18%, with 0% on essentials and 40% on a short list of luxury and sin goods. A sale inside your own state splits that tax into CGST and SGST, while a sale to another state carries IGST instead. Same total, different split.
| Step | What happens to the tax |
|---|---|
| Charge | GST is added to the invoice at the item’s rate |
| Report | Invoice-wise detail goes into GSTR-1 |
| Offset | Available credit reduces what you owe |
| Pay | The balance leaves your electronic cash ledger |
The working formula is short.
Net GST payable = Output tax minus Input tax credit
A GST calculator settles the first half of that sum in seconds.
Difference Between Output Tax and Input Tax
This is where owners mix things up, mostly because both figures sit on the same screen at filing time. One is money you collected from a customer; the other is money you already handed to a supplier.
| Aspect | Output tax | Input tax |
|---|---|---|
| Meaning | GST charged on your sales | GST paid on your purchases |
| Arises on | Outward supply | Inward supply |
| Effect | Creates a liability | Creates a credit |
| Ledger | Liability ledger | Credit ledger |
| Shows in | GSTR-1 and GSTR-3B | GSTR-2B and GSTR-3B |
Only the tax your supplier has actually declared shows up as input tax credit in your GSTR-2B. Output tax does not wait for anyone. It exists the moment you raise the invoice.
Output Tax Example
Take a plywood and laminates dealer in Jalandhar closing the February 2026 return period. Plywood sits at 18% under HSN 4412, and both the sales and the purchases happened inside Punjab.
| Line | Taxable value | Tax at 18% |
|---|---|---|
| Sales | Rs.9,26,000 | Rs.1,66,680 output tax |
| Purchases | Rs.7,15,400 | Rs.1,28,772 input tax credit |
| Net cash | Difference of the two | Rs.37,908 payable |
Note: this is an invented example for illustration only. The figures show the working, not any real trader’s numbers.
Because both sides are intra-state, that Rs.1,66,680 sits as Rs.83,340 CGST and Rs.83,340 SGST, and the credit splits the same way. Only Rs.37,908 leaves the bank, under a quarter of the tax collected. An ITC calculator is a quick way to sanity-check the credit side before filing.
Why Output Tax Is Not Your Money to Keep
Treat it as revenue and you will be short when the return falls due, the 20th of the following month for monthly filers. The tax sat in your bank account for weeks, but it belonged to the exchequer the whole time.
The law is blunt about this. Section 76 of the CGST Act says any amount collected as tax must be paid to the government, whether or not the supply was taxable, and Section 50 adds interest at 18% a year on late payment. The figure goes into table 3.1(a) of GSTR-3B, where the payment is settled on the GST portal.
A GST return filing checklist catches most of the small slips before you submit.
Restaurants feel this more sharply than retailers. A standalone restaurant charges 5% and gets no credit back, so the whole amount is paid in cash, which is why the GST rules for restaurants matter so much to a thin-margin kitchen.
The slip that keeps surfacing since the September 2025 revision is an item master still carrying the old rate, understating the tax month after month until someone finally reconciles.
Find the Best GST Invoicing Software
Getting output tax right is really a billing problem, not an accounting one. Correct rate at the counter, correct state split on the bill, and the return more or less writes itself.
The best GST invoicing software applies the current rate per item, splits CGST, SGST and IGST by place of supply, and carries the totals into your filing. Petpooja Invoice does this for retail counters, distributors and stores, and the full Invoice feature list has the detail.
For restaurants, Petpooja POSS applies the same tax logic on every bill and KOT. Picture your next filing date with the output tax figure already checked and ready.
Frequently Asked Questions
No. Output tax is what you charge customers on your sales, while input tax is what you paid your suppliers on purchases. The two meet only when the second is set off against the first.
Multiply the taxable value of each item by its GST rate, then add the lines up. For an intra-state sale the total is halved into CGST and SGST; an inter-state sale carries the whole amount as IGST.
Usually, yes. Credit sitting in your electronic credit ledger can be used against output tax in the order the law sets out, but tax owed under reverse charge is excluded from it and has to be paid in cash.
Section 76 of the CGST Act requires any amount collected as tax to be deposited with the government, even where the supply turned out not to be taxable. Interest under Section 50 runs at 18% a year on the delay, and a penalty can follow.
Yes, and it bites harder. A standalone restaurant charges 5% output tax but cannot claim credit on rent, groceries or equipment, so the whole amount is paid in cash rather than partly offset.
