How to Calculate GST? Formula and Examples
While it is imperative to register and file GST on your business transactions, it is also vital to understand the process of calculation of GST. As a registered company in India, all traders and businessmen must obtain a GSTIN (GST Identification Number) and In this article, we shall take a close look at the calculation of GST, the different tax slabs under GST, and many more related and essential aspects of GST calculation.
What is GST?
A comprehensive tax levied on the supply of goods and services in India is called Goods and Services Tax, i.e. GST. In effect since 1st July 2017, the GST was implemented as a single tax system to replace most of the other indirect taxes at that time. The other tax systems that were abolished and replaced were the Central Excise Duty, Entry Tax, VAT, Octroi, etc.
Being a comprehensive tax system, GST is levied on the production/manufacturing, sale, and consumption of the produced goods across the country. All kinds of enterprises, big or small, must have a GSTIN – GST Identification Number- to register themselves under the tax system of GST.
In the case where the transaction is taking place within the states i.e. in the case of the Inter-state transactions, Integrated GST is levied; whereas, in the case of any sales taking place intra-state, Central GST and the State GST come into the picture for being levied.
These are the different kinds of GST collected by the government:
- State GST: Also called SGST, it is collected by the State Government.
- Central GST: Also called CGST, it is collected by the Central Government.
- Integrated GST: Also called IGST, is to be paid to the Central Government for inter-state transactions.
- Union Territory GST: Also called UTGST, it is to be paid to the Union Territory Governments. All the 5 UTs- Dadra and Nagar Haveli, Chandigarh, Andaman and Nicobar Islands, Lakshadweep, and Daman and Diu impose the UTGST.
Different Tax Rates that come under GST?
The GST goods can be categorized into the following 5 tax rates: 0%, 5%, 12%, 18%, and 28%.
While there are certain goods including electricity, alcoholic drinks, petroleum products that are not taxed under GST. The individual state governments tax these goods separately based on the previous tax system.
How to Calculate GST?
As a Buyer, to calculate the GST on your goods, you must be familiar with the Net Price of the good and the corresponding GST rate that applies to that good (5%, 12%..and so on).
GST Calculations Formula
It is simple to calculate the GST using the formula given here:
- When the GST is excluded:
- GST = (Supply Value * GST%) / 100
Price of the Good = Supply Value + Amount of GST
- When the GST is included in the supply value
- GST = Supply Value – [Supply Value x {100/(100+GST%)}]
Examples of GST Calculation
Let’s look at the two examples that consider the two scenarios discussed in the previous section:
EXAMPLE FOR CALCULATING INDIA GST
We assume the following:
Original Cost of the Product (Supply Value) = 100
GST% = 5
So, from the formula for calculating GST
GST Amount = (Supply Value * GST) / 100
So, in this case,
Net Price of the Product = Original Price + GST Amount
We can get the GST amount on the product as depicted here:
GST Amount = (100 * 5) / 100
GST Amount = 5
That makes the NET Price of the product = Rs. 105
EXAMPLE FOR EXCLUDING/ELIMINATING GST FROM BASE AMOUNT
Assuming Original cost of the product = 100
GST% =5
Now, in this case,
Net Price of the Product = Original Price – GST Amount
So, after applying the formula for excluding GST,
GST = Supply Value – [Supply Value x {100/(100+GST%)}]
GST = 100- ( 100x 100/105)
GST = 100-95.23
GST = 4.76
Therefore,
Net Price of the Product = 100 – 4.76
Net Price of the Good= Rs. 95.23
What is the GST inclusive Amount?
The term GST inclusive amount is used for referring to the total value of the product/goods that have an included GST price in its original value. In this scenario, there is no separate tax charged from the buyer and therefore, it is called the GST inclusive amount.
What is the GST Exclusive Amount?
The term GST exclusive amount refers to the price of the product/good which does not include the GST amount.