How to calculate Goods and Service Tax (GST) with examples- The Complete Guide

By | November 6, 2021

The Goods and Services Tax, abbreviated as GST, is a type of tax imposed by the Indian government at the national level. On the internet, there are several GST Calculators that may be used to figure out how much GST would cost.

The GST is a nationwide tax imposed by the Indian government on dealers, makers, and consumers of goods and services.

GST evolved from the notion of Value Added Tax (VAT), which means it is applied at each stage of the supply chain and the consumer is responsible for paying the GST amount levied by the last dealer or supplier.

What are the Advantages of GST?

Some of the benefits of putting GST on products are listed below. 

The advantages of implementing a single indirect tax can be large and widespread. 

  1. This tax structure contributes to the maintenance of a worldwide standard. It also aids in ensuring that the maker and the consumer are on the same page.
  1. The elimination of double taxation on commercial goods is the main goal of the GST implementation. It encourages manufacturers and sellers to compete for high-quality items, which helps the country’s GDP grow.
  1. Manufacturers’ manufacturing costs are reduced as a result of the tax reduction, which boosts competition among exporters.
  1. The most important concern in the market, inflation, is expected to reduce with the installation of GST.
  1. It is also expected that tax liabilities will be reduced. Because input tax can be offset against output tax, a price reduction is envisaged.

How to calculate GST using the GST calculator

Using the GST calculator, we can calculate GST as follows:

Taxpayers can learn about the various GST rates that apply to various categories under the new tax structure. These are 0 percent, 5%, 12%, 18%, and 28%, which are required when calculating GST.

GST has several tax heads:

GST is divided into four categories, each of which has its own set of rules.

  • State Goods and Services Tax (SGST): This tax is collected by the state government.
  • CGST (Central Goods and Services Tax): This tax is collected by the federal government.
  • UTGST (United Territory Goods and Services Tax): This tax is collected by the Union Territory Government 
  • Integrated Goods and Services Tax (IGST). The Central Government collects it for inter-state transactions and imports.

Interstate products are subject to IGST if the product’s supplier is in a different state and the product is delivered in a different state. Interstate supplies are taxed at an equal rate of CGST and SGST in this situation.

GST Calculation Formula: 

The taxpayer can use the formula listed below to calculate GST. The formula below can be used to compute the net price of a product after applying GST and then subtracting it.

The GST computation formula is as follows:

1. Include GST:

(Original Cost x GST Percentage)/100 = GST Amount

Original Cost + GST Amount = Net Price

2. Get rid of the GST:

Original Cost – [Original Cost x 100/(100+GST percent)] GST Amount = Original Cost – [Original Cost x 100/(100+GST percent)]

Original Cost – GST Amount Equals Net Price.

Calculation of GST using an example

Consider the following scenario: A product is sold for Rs. 2,000, and the GST rate is 12 percent.

The product’s net price is then Rs. 2,000 + 12 percent of Rs. 2,000.

This is Rs. 2,240 (Rs. 2,000 + Rs. 240).

What are the Methods for Using Online GST Calculators?

Methods for Using Online GST Calculators: 

For the convenience of users, some online websites provide online GST calculators.

  • The customer can choose between GST included and GST exclusive options.
  • Enter the product’s original quantity.
  • Choose the GST percent rate that applies to the product.
  • To compute the final amount of the product, use the “Calculate” option.

What has been the impact of GST on Product Pricing?

The central and state governments levy indirect taxes, which are referred to as Central GST (CGST) and State GST (SGST), respectively. The seller would charge buyer taxes such as CGST and SGST, which must be paid to the Central and State governments, respectively, for intrastate transactions.

Some additional facts and FAQs about calculating GST 

  1. The following taxes will be a set-off against the same or a different tax credits in the future:

CGST- CGST and IGST

SGST- SGST and IGST

IGST- IGST, CGST and SGST

  1. Why is a dual GST required?

Both the Centre and the States are given the authority to levy and collect taxes in India. Both governments have separate obligations for which they must raise funds. The demand of fiscal federalism is maintained with a dual GST.

  1. GST Legislation: 

GST went into effect in 2017 and has seen a lot of modifications since then, all of which are implemented through the passage of these GST bills.

  1. Who is in charge of levying and administering GST?

CGST and SGST will be levied and administered by the Centre, whereas SGST/UTGST would be levied and administered by the states/UTs.

  1. Is it necessary for an ISD to register?

ISD is required in order to get mandatory GST registration in a state or UT where he makes taxable supplies of goods or services, or both.

  1. Who determines the GST rates?

The rates of the CGST and SGST are established jointly by the Centre and the States.

  1. What happens if a dealer is migrated with an inaccurate PAN and the firm’s status is changed from sole proprietorship to partnership?

Because the partnership will have a new PAN, a new registration is required.

  1. Is the country liquor seller required to migrate to GST from VAT because liquor is not mentioned in the GST law?

If the individual is involved in the supply of commodities that are not subject to GST, no registration is necessary.

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Category: GST