What is GST?
GST is an indirect tax levied on the supply of goods and services in India. GST was first introduced in 2017 as a single taxation system that subsumed different types of indirect taxes present in the country. Indirect taxes that were abolished include octroi, entry tax, VAT, and Central Excise Duty.
GST can be called a comprehensive tax levied on the consumption, sale, and manufacturing of goods and services in the country. Whether small or large, all organizations are required to have a GST identification number to get registered under the GST Act. While integrated GST is charged on inter-state sales (within the state), central GST and state GST are levied on intra-state sales.
There are different types of GST collected by the government. Here’s a list -
- State GST (SGST) - It is collected by the State Government.
- Central GST (CGST) - It is collected by the Central Government.
- Integrated GST (IGST) - It is collected on interstate imports and transactions by the central government.
- Union Territory GST (UTGST) - It is collected by the government of the Union Territory.
What is GSTIN?
GSTIN, or goods and services identification number, is a 15-digit alphanumeric code assigned to every person registered under the GST Act. GSTIN is a PAN-based number that consists of a registration number, entity code, state code, etc.
GSTIN is used for various purposes like filing returns, making payments, and claiming input credits. It also helps ensure compliance and transparency in GST system.
How is GST Calculated?
The unified taxation system under GST allows taxpayers to easily determine the tax levied at various stages for different goods and services. To calculate GST, it is essential to know the applicable GST rate for the specific category. GST rates are divided into four main slabs: 5%, 12%, 18%, and 28%.
Here's a simple example of GST calculation:
If goods or services are sold for ₹1,000 with an applicable GST rate of 18%, the net price will be calculated as:
Net Price = ₹1,000 + (₹1,000 × 18/100) = ₹1,000 + ₹180 = ₹1,180.
Given below is the formula of GST calculation for the taxpayer -
When you want to add GST -
GST Amount = (Original cost x GST %)/100
Net Price = Original Cost + GST Amount
When you want to remove GST -
GST Amount = Original Cost - [Original cost x {100/(100+GST%)}]
Net Price = Original Cost - GST Amount
What is GST Inclusive and Exclusive Amount?
- GST Inclusive Amount - GST inclusive amount refers to the total value of the product after including the GST amount in the base price of the product. In the case of a GST-inclusive amount, GST is not charged separately from the customer.
- GST Exclusive Amount - GST exclusive amount refers to the value of the product after subtracting the GST amount from the GST inclusive price of the product.
How to Calculate GST (Goods and Services Tax)?
Now that you know the GST formula, you must be wondering how GST is calculated. Follow the below-mentioned steps to calculate the GST amount -
- Determine the rate of GST applicable to the goods and services that you are purchasing or selling.
- Determine the total value of the services and goods on which GST is supposed to be calculated.
- Next, calculate the GST amount by multiplying the transaction value with the GST rate applicable to the goods and services under consideration.
- Calculate the gross amount to be paid, including GST, by adding the amount to the transaction value.
Example of GST Calculation
Suppose a product is sold at Rs.5,000, and this product falls under the 18% GST slab rate.
In this case, the net price payable for the product will be Rs.5,000 + 18% of Rs.5,000 = Rs.5,000 + 900 = Rs.5,900.
Calculation of Tax Under GST
GST allows manufacturers and dealers to claim the benefit of Input Tax Credit. The below example compares the tax payable before GST and after GST.
| Value to Manufacturer |
Old Tax system |
GST System |
| Cost of production |
Rs. 1,00,000 |
Rs. 1,00,000 |
| Profit Margin of 10% |
Rs.10,000 |
Rs.10,000 |
| Excise duty of 12% |
Rs.12,000 |
- |
| Total production cost |
Rs.1,22,000 |
Rs.1,10,000 |
| VAT of 12.5% |
Rs.15,250 |
- |
| SGST of 6% |
- |
Rs.6,600 |
| CGST of 6% |
- |
Rs.6,600 |
| Invoice value for manufacturer |
Rs. 1,37,250 |
Rs. 1,23,200 |
| Value to Wholesaler |
- |
- |
| Cost of goods |
Rs. 1,37,250 |
Rs. 1,23,200 |
| Profit margin of 10% |
Rs. 13,725 |
Rs. 12,320 |
| Total Value |
Rs. 1,50,525 |
Rs. 1,35,520 |
| VAT of 12.5% |
Rs. 18,815.625 |
- |
| SGST of 6% |
- |
Rs. 8131.2 |
| CGST of 6% |
- |
Rs.8131.2 |
| Invoice value to wholesaler |
Rs. 1,69,340.625 |
Rs. 1,51,782.4 |
| Value to Retailer |
- |
- |
| Cost of goods |
Rs. 1,69,340 |
Rs. 1,51,782 |
| Profit margin of 10% |
Rs. 16,934 |
Rs. 15,187 |
| Total Value |
Rs.1,86,274 |
Rs. 1,66,969 |
| VAT of 12.5% |
Rs. 23,284 |
- |
| SGST of 6% |
- |
Rs. 10,018 |
| CGST of 6% |
- |
Rs. 10,018 |
| Invoice value to retailer |
Rs.2,09,558 |
Rs. 1,87,005 |
What is a GST Calculator?
A GST calculator is an online tool that is ready to use and helps you figure out how much GST you owe for a quarter or a month, depending on the GST slab in which the goods fall. Using a GST calculator online
What are the Benefits of Using the GST Calculator?
Given below are some of the benefits of using a GST calculator -
- It helps the users to find out the gross product and net product price on GST rates.
- It allows users to differentiate between IGST, CGST, and SGST and calculate taxes accurately.
- It provides instant results and saves time.
- It reduces the chances of manual error while calculating the cost of services and products.
- It is easy to use and helps calculate GST in a hassle-free way.
As the landscape of GST significantly influences economic pathways, understanding these aspects becomes essential. Don’t have enough time to take care of GST compliances or file your GST return? Don’t worry! Our experts are here to help you with GST filing, GST compliance, and the smallest of GST-related queries. Book an online CA Now!
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