How to Calculate Your GST Using a GST Calculation Formula?

1. Remove GST
   1. GST Amount = Original Cost - [Original Cost x {100/(100+GST%)}]Net Price = Original Cost - GST Amount

To calculate GST (Goods and Services Tax), you need to follow these steps:

Step 1: Check the GST rate applicable for the goods or services you are selling or purchasing.

Step 2: Determine the transaction value of the goods or services on which GST is to be calculated.

Step 3: Calculate the GST amount by multiplying the transaction value with the applicable GST rate.

Step 4: Determine the gross amount payable by adding the GST amount to the transaction value.

Example of GST Calculation

In case a product is sold for Rs.5,000 and the GST rate applicable to it is 12%

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.

Tax Calculation under GST System

Under the GST regime, manufacturers and dealers can benefit from input tax credit.

Below is an example to show the difference in the amount of tax payable under the old tax system and the GST system:

Impact of GST on Product Pricing

Indirect tax will be levied by Central and State Government called Central GST (CGST) and State GST (SGST), respectively. In the case of intra-state transactions, the seller will collect CGST and SGST from the buyer which will be paid to the Central and State Government, respectively. Listed below is an example of the impact of GST on product pricing:

Benefits of GST Calculator

Here are some of the key benefits of using a GST calculator:

1. It enables users to determine the net or gross product price on GST rates.
2. It enables users to differentiate between SGST, CGST and IGST and calculate each tax accurately.
3. It saves time by providing instant results.
4. It lowers the risk of human error when calculating the cost of products and services.
5. It is simple to use and helps you calculate GST in a hassle-free manner.

GST Bill Rates and Their Calculation

The GST Bill is touted to be a landmark bill with respect to taxation in India. This Bill is being implemented with the intention of curbing 'double-taxation' and irregularities regarding the same. On 29 March, 2017 four bills were approved.

The government has set a deadline of 1, July 2017 for the complete implementation of this Bill. A number of products and services would become cheaper and others would become heavier on the wallet.

However, instead of the expected single tax slab, a multi-tier tax slab has been put forth with four different tax rates of 5%, 12%, 18% and 28%. The justification behind this multi-tier system is that essential goods and services cannot be taxed at the same rate as luxury products and services.

It is essential to note that the GST Bill has two components to it - one that is levied by the Centre which is known as CGST or Central GST and the other which is levied by all States known as SGST or State GST.

Rates for each would be approved based on revenue and acceptability, among other factors. Except for those goods and services that have been exempted, SGST and CGST will be applicable on all goods and services. Both Centre and States would have jurisdiction for the determination of tax rates and for all taxpayers based on the threshold for products and services that have been prescribed.

From the example, it's clear that subsuming excise duty is favourable to the end consumer. There is a reduction in cost for manufacturers, wholesalers, and retailers due to the subsuming of VAT, Service Tax, and Excise duty. Due to the reduction in cost, there will be a reduction in input tax credit.

Tax Calculation for Inter-State Sales

Integrated GST (IGST) will be levied by the Central Government on inter-state supply of goods and services. In the case of inter-state transactions, IGST will be transferred to importing state.

In the old tax system, CST was charged over and above VAT and the excise duty for movement of goods between 2 states. In the GST system, IGST is the only tax levied on goods moving across state borders. Below is an example to understand the IGST system:

As per the above example, it is clear that under the GST system, manufacturers, wholesalers, and retailers will see reduction in cost whether it is inter-state or intra-state sales.

Benefits of GST Implementation in India

Implementing a single indirect tax is beneficial in many ways such as:

1. It not only helps in setting an international standard but also ensures transparency throughout the tax structure right from the manufacturer to the consumer.
2. The primary objective of implementing GST is to prevent double taxation of commercial goods. GST is expected to ultimately increase competition among the manufacturers and sellers to provide high-quality goods which in turn will boost the GDP of the country.
3. The reduce in tax will bring down the production cost for companies. Thus, increase the competition among exporters.
4. Inflation is expected to decrease after the implementation of GST.
5. It is also said that there will be a decrease in tax liability. Reduction in price is expected as input tax credit is available against output tax. Following taxes will be set-off with the same or with the different tax input credits

Recent Changes in GST Calculation Rules

1. As observed in the previous examples, there have been changes noted in the type of tax and amount imposed.
2. Excise is generally applicable on capital goods during production used by manufacturer. Under the new Bill, excise on capital goods will be subsumed as there will only be a single rate of tax for each type of product.
3. Due to the subsuming of Service Tax, VAT, Excise, there will be a fall in the cost of wholesalers, manufacturers and retailers. This will in turn reduce the total cost to the manufacturer due to a reduction in procurement cost.
4. There will also be a fall in input tax credit for the retailer/wholesaler under GST.

Therefore, as observed there will be a fall in prices for the manufacturer. However, changes in GST rates will depend on the products and services.