What is GST?
Goods and Services Tax (GST) is an indirect tax on the supply of goods and services in India, effective from July 1, 2017. It replaced multiple indirect taxes like Central Excise Duty, VAT, and Octroi. GST is a comprehensive, multi-stage, destination-based tax, with goods and services categorized into five tax rates: 0%, 5%, 12%, 18%, and 28%.
For intra-state sales, Central GST (CGST) and State GST (SGST) are applied, while Integrated GST (IGST) is charged for inter-state transactions. Certain products like petroleum, alcoholic drinks, and electricity are taxed separately by states. Businesses must obtain a GST Identification Number to comply with GST regulations.
Different Forms of GST
GST is categorized into four types, each collected by different government entities:
- State GST (SGST): Collected by the State Government for intra-state transactions.
- Central GST (CGST): Collected by the Central Government for intra-state transactions.
- Integrated GST (IGST): Collected by the Central Government for inter-state transactions and imports.
- Union Territory GST (UTGST): Collected by the Union Territory Government for intra-UT transactions.
What is a GST Calculator?
A GST calculator is a handy online tool used to compute the GST payable for a month or quarter. It is useful for buyers, manufacturers, wholesalers, and other business users. The calculator helps determine the gross or net price of a product based on the GST amount and provides a breakdown of the percentage-based GST rates. It can also divide the rate between Central GST (CGST) and State GST (SGST) for intra-state transactions or calculate the correct Integrated GST (IGST) for inter-state transactions.
How is GST Calculated?
GST is calculated by applying the relevant GST rate to the net price of goods or services. The GST rates are 5%, 12%, 18%, and 28%.
For Buyers:
- Input the net price of the item.
- Enter the applicable GST percentage.
For Manufacturers and Wholesalers/Retailers:
- Input the cost of production.
- Enter the profit ratio percentage.
- Enter the applicable GST percentage.
View Calculation Details: The GST calculator will display:
- Total price
- Total tax/IGST amount
- CGST amount
- SGST/UTGST amount
GST Calculation Formula
To calculate GST, you can use the following formulas based on whether you are adding or removing GST from the base amount:
Adding GST:
- GST Amount = (Original Cost x GST%)/100
- Net Price = Original Cost + GST Amount
Removing GST:
- GST Amount = Original Cost – [Original Cost x {100/(100+GST%)}]
- Net Price = Original Cost – GST Amount
Steps for GST Calculation
- Check GST Rate: Determine the applicable GST rate for the goods or services.
- Determine Transaction Value: Identify the transaction value of the goods or services.
- Calculate GST Amount: Multiply the transaction value by the GST rate.
- Calculate Gross Amount: Add the GST amount to the transaction value to get the gross amount payable.
Example of GST Calculation
In case a product Value is Rs.₹1,000 and the GST rate applicable to it is 18%
Then, the net price of the product will be Rs.5,000 + 12% of Rs.5,000 = Rs.5,000 + Rs.600 = Rs.5,600.
Adding GST:
- GST Amount = (1,000×18) /100 = ₹180
- Net Price = 1,000+180=₹1,1801,000 + 180 = ₹1,1801,000+180 = ₹1,180
Removing GST:
- GST Amount = 1,180−{(1,180×100)/118} = ₹180
- Original Cost = 1,180−180=₹1,0001,180 – 180 = ₹1,0001,180−180 = ₹1,000
Benefits of a GST Calculator
- Determines Net or Gross Price: Helps users calculate the net or gross price based on GST rates.
- Differentiates Tax Components: Accurately calculates SGST, CGST, and IGST.
- Saves Time: Provides instant results, eliminating the need for manual calculations.
- Reduces Human Error: Minimizes errors inherent in manual computations.
- Ease of Use: Simple and hassle-free, making GST calculations straightforward.
- Ensures Accuracy: Delivers precise results, enhancing reliability.
- Breakdown of Taxes: Offers clear separation of CGST, SGST, and IGST amounts.
- Estimates Gross Price: Enables users to estimate the gross price for better tax understanding.
Using a GST calculator ensures compliance with GST regulations and helps avoid additional charges by filing GST returns on time.
Read More
- Goods and Services Tax: Meaning, Advantages and How Does GST Work?
- How to File GST Return Online in India?
Conclusion
Calculating GST involves understanding the applicable GST rate for goods or services, determining the transaction value, and applying the appropriate GST calculation formula. Whether adding GST to find the gross price or removing GST to ascertain the original cost, accuracy is crucial to avoid financial discrepancies. Utilizing an online GST calculator streamlines this process, offering convenience, speed, and reliability in tax computations. By mastering GST calculation methods, individuals and businesses can effectively manage their financial obligations and ensure compliance with GST laws.
