GST, or the Goods and Services Tax, refers to the tax levied on all goods and services in India. Effective from the 1st of July 2017, GST was established as a single taxation system in the country and was brought in to replace all indirect taxes in the country. GST is a comprehensive taxation system that applies to the manufacture and even the sale of goods and services across the country.
In the case of the sale of goods and services within the states in India, an Integrated GST is levied. In the case of the sale of goods and services across states in the country, both Central GST and a State GST are levied. By using GST services, the Government of India has simplified the taxation structure for businesses in the country.
Different Forms of GST Applicable in India
In India, the following types of GST are applicable on the sale of goods and services:
- Central GST: Also referred to as CGST, this is collected by the Union Government of India.
- State GST: Also referred to as SGST, this is collected by the respective State Governments.
- Union Territory GST: Also commonly referred to as UTGST, this form of GST is collected by the respective Union Territories in the country.
- Integrated GST: Also referred to as IGST, this form of GST is collected by the Union Government for all inter-state imports and transactions.
How is GST Calculated in India?
With the introduction of the unified tax system in India, it has now become more transparent for taxpayers across the country to understand better the taxes applied at each point. To better understand the GST structure, taxpayers in the country must first ascertain the different categories established under the new GST regime. As per GST norms, the different tax slabs are – 5%, 12%, 18%, and 28%.
Let us now understand how GST works with the help of an example.
Let us assume that a specific product is sold for Rs.1,000, and the GST tax slab it falls under is 18%.
Accordingly, the net value of the product is:
₹1,000 + (1,000 x (18/100)) = ₹1,000 + ₹180 = ₹1,180
Formula For GST Calculation
By making use of the formula mentioned below, manufacturers, wholesalers, retailers, and businesses alike can calculate the total value of their product, after applying the said GST slabs.
- Calculation of Simple GST:
To add GST, simply use the formula: Total GST Amount = (Original Cost of the Product x GST%)/100
Thus, the Net Price of the Product = the Original Cost of the Product + the GST Amount
- To Deduct the GST Amount:
If you wish to deduct the GST amount applicable, use the formula:
GST Amount = the Original Price of the Product – [the Original Price of the Product x {100/ (100 + GST%)}]
The table below illustrates how goods, as well as services, were taxed before and after the GST regime:
Rate Applicable (%) | Amount | |
| The Original Cost of the Goods | ₹3,00,000 | |
| The GST % Applicable | 18% | ₹54,000 |
| The Final Cost of the Goods Sold (COGS) | ₹3,54,000 |
GST Calculation for Manufacturers
Rate Applicable (%) | Pre-GST Cost | Post-GST Cost | |
| The Original Cost of the Product | ₹40,000 | ₹40,000 | |
| Excise Duty Applicable | 12% | ₹4,800 | Nil |
| Profit | 10% | ₹4,000 | ₹4,000 |
| Total Amount | ₹48,800 | ₹44,000 | |
| VAT Applicable | 12.5% | ₹6,100 | Nil |
| CGST Applicable | 6% | Nil | ₹2,640 |
| SGST Applicable | 6% | Nil | ₹2,640 |
| The Wholesaler’s Final Invoice | Rs.54,900 | ₹49,280 |
GST Calculation for Wholesalers and Retailers
Rate Applicable (%) | Pre-GST Cost | Post-GST Cost | |
| The Original Cost of the Product | ₹54,900 | ₹49,280 | |
| Profit | 10% | ₹5,492 | ₹4,928 |
| Total Amount | ₹60,392 | ₹54,208 | |
| VAT Applicable | 12.5% | ₹7,548 | Nil |
| CGST Applicable | 6% | Nil | ₹3,252 |
| SGST Applicable | 6% | Nil | ₹3,252 |
| The Wholesaler’s Final Invoice | ₹67,970 | ₹60,712 |
Using a GST Calculation Tool
By using a GST calculator, whether you are an individual or a business owner, you can easily ascertain the GST amount applicable to a good or service. To do so, follow the steps mentioned below:
- Step 1: Start by clicking on the GST Inclusive or GST Exclusive option based on your requirement.
- Step 2: Next, enter the original amount of the product.
- Step 3: Proceed by then selecting the applicable GST rate from the drop-down menu.
- Step 4: Finally, click on ‘Calculate’, to ascertain the GST applicable.
Ever since the implementation of the GST regime, the taxation process has become more transparent and simplified for individuals and business owners alike. By making use of the GST calculator on the Bajaj MARKETS website, you can calculate the GST applicable to your goods/services in an instant.
