Goods and Services Tax (GST) has reshaped India's tax landscape, unifying different indirect taxes and simplifying the system. This comprehensive system of taxation impacts businesses, requiring a nuanced understanding of GST calculation. From diverse tax slabs to compliance requirements, understanding how to calculate GST plays an important role in financial decision-making. This article helps you understand the GST calculation formula, how to use the GST calculator, and other aspects of the GST regime.
What is GST?
GST, is a indirect tax, levied on the supply of goods and services in India. GST was first introduced in 2017 as a single taxation system that replaced the 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 tax evasion and the GST system.
How is GST Calculated?
There are various ways to calculate the amount of GST liability on the supply of goods and services. The best way to do so is to use a GST calculator to find out the GST rates applicable to the goods and services for the month or quarter based on the types of products.
Enter the net price and the GST tax rates that apply to such products or services. Currently, there are 4 different GST slab rates: 5%, 12%, 18%, and 28%.
Click on ‘Calculate’ to see the original or final gross price and the GST liability.
What is the GST Calculation Formula?
Given below is the formula for calculating GST 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
How to Calculate GST (Goods and Services Tax)?
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.
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.
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