How to Calculate GST (Goods and Services Tax) in India?

What is GST?

The Goods and Services Tax is an integrated indirect tax levied on the supply of goods and services in India. GST has been implemented in the country since July 1, 2017, and it has replaced various indirect taxes, such as VAT, service tax, and excise duty. It comes in three forms:

• CGST (Central Goods and Services Tax): Collected by the Central Government on intra-state sales.
• SGST (State Goods and Services Tax): Collected by the State Government on intra-state sales.

• IGST (Integrated Goods and Services Tax): Collected by the Central Government on interstate sales.

  GST Rate Structure

The rates of GST differ according to the nature of goods and services. The common slabs of GST in India are as follows:

• 0%: Essential goods and services, like fresh vegetables, milk, books, healthcare services, and education services.
• 5%: Basic necessity goods, including packaged food items, railway tickets, small restaurant services, and household necessities like edible oils and sugar.
• 12%: Standardised articles and services. Any processed food, business class air tickets, hotel stay for ₹1,000-₹7,500 per night, without mobile phones and medicines
• 18%: General articles and services. Consumer electronics like TVs and refrigerators, restaurant service; non A.C. and A.C. -type of financial services and telecom services .
• 28%: Luxury goods. Cars, aerated beverages, tobacco products, A.C. but for staying in an A.C. hotel above ₹7,500 a night.

How to Calculate GST?

GST can be calculated using a simple formula:

GST Amount = Taxable Value × GST Rate

Invoice Value = Taxable Value + GST Amount

Example Calculation

Let's say a product is priced at ₹10,000, and the applicable GST rate is 18%.

GST Amount = 10,000 × 18% = ₹1,800

Invoice Value = 10,000 + 1,800 = ₹11,800

Reverse GST Calculator

If the final price of a product includes GST and you want to extract the GST amount, use the formula:

GST Amount = [Invoice Value × GST Rate / (100 + GST Rate)]

Example:

If the invoice value (inclusive of GST) is ₹11,800 and the GST rate is 18%:

GST Amount = [11,800 × 18/ 118] = ₹1,800

Taxable Value = 11,800 - 1,800 = ₹10,000

GST Calculation for Different Transactions

For Intra-State Sales (Same State)

GST Amount = (Product Price × GST Rate) / 2

Example: If GST rate is 18%, then CGST = 9% and SGST = 9%

For Inter-State Sales (Between Different States)

IGST = (Product Price × GST Rate)

Example: If GST rate is 18%, then IGST = 18%

GST Calculator Formula Breakdown

If you want to perform GST calculations manually or understand how a GST calculator works, here are the formulas:

GST Inclusive Calculation:

Final Price = Product Price + (Product Price × GST Rate / 100)

GST Exclusive Calculation:

GST Amount = (Final Price × GST Rate) / (100 + GST Rate)

Conclusion:

Calculating GST is straightforward once you understand the applicable tax rates and formulas. Whether you are a business owner, accountant, or consumer, knowing how to compute GST can help in better financial planning and compliance with tax laws. Utilize an online GST calculator to simplify the process and ensure accuracy in tax computations.

FAQ.

Q.How do I calculate GST for an invoice?

GST is calculated according to the given formula:
GST Amount = (Taxable Value × GST Rate)
Final Price = Taxable Value + GST Amount

Q. How to calculate GST if the price is inclusive of tax?

In case the final price is including GST, the formula will be:
Taxable Value = Final Price / (1 + GST Rate/100)
GST Amount = Final Price - Taxable Value

Q. What are the various rates of GST in India?

In India, there are different GST rates i.e 3%, 5%, 12%, 18%, and 28%, depending on the type of goods or services. Some essentials do not attract GST.

Q. How to calculate CGST and SGST in intra-state sales?

GST is then divided equally into CGST (Central GST) and SGST (State GST) for intra-state transactions.
If the GST rate is 18%, then CGST = 9% and SGST = 9%.
For example, if the taxable value is ₹10,000 and GST is 18%,
CGST = (10,000 × 9%) = ₹900
SGST = (10,000 × 9%) = ₹900

Q. What is IGST and how is it calculated?

IGST (Integrated GST) applies to all inter-state transactions. It is calculated as a single tax.
Formula: IGST = (Taxable Value × GST Rate) / 100
For example, if the taxable value = ₹10,000 and IGST = 18%, then IGST = ₹1,800.

Q. How to calculate reverse GST amount?

Total Amount: ₹2,000
GST Rate: 18%
Divisor: 1.18 (since 1 + 0.18)
Base Amount: ₹1,694.92 (₹2,000 ÷ 1.18)
GST Amount: ₹305.08 (₹2,000 - ₹1,694.92)

Also Read : Common Errors Made While Filing GST Returns & How to Avoid Them