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INTRODUCTION
GST stands for Goods and Services Tax and has been in effect in India since July 1, 2017. It has replaced many Indirect Taxes such as VAT, excise duty, etc. It is important to calculate GST accurately so that you can maintain proper financial records for yourself and avoid tax penalties. GST can be calculated easily using a GST calculator. It helps you to calculate accurately the tax that you have to pay on any goods or services. In this article, we will explore what GST is, how to calculate GST, how to calculate GST percentage, the GST formula, etc. Read through till the end to educate yourself about GST and how it affects your finances.
What Is GST?
GST stands for Goods and Services Tax. It is a tax system that has eliminated many indirect taxes such as excise duties and VAT etc. It is comprehensive and is applies to all goods and services. However, alcohol for consumption by people and petroleum products are exempted from this tax. Under the system of GST, all goods and services are divided into tax slabs. They are put into specific slabs based on their nature. The tax rates range from 0% to 28%. There are three main components of GST- CGST, SGST, and IGST.
CGST and SGST are charged separately by the Central and State governments respectively on the same goods and services. IGST is charged for the movement of goods interstate or between states.
How to Calculate GST?
It is important to know how to calculate GST accurately to avoid any tax penalties and maintain accurate financial reports. Although this can be done easily by using a GST calculator it is important to know the formula as well. The GST calculation formula is as follows:
GST = (Original cost * GST rate)/100
Here, the original cost is the cost of the goods and services before adding GST. The GST rate is the rate of GST that applies to specific goods and services based on where they lie in the tax slab.
For a better understanding of this concept, let us take an example.
If the original cost of a product is Rs. 100 and the applicable GST on it is 18%, the GST amount would be=GST = (100*18)/100=18
Therefore, the total cost of the product now after adding GST is Rs. 100 + Rs. 18 = Rs. 118.
Calculating GST Percentage
To know how to calculate the GST percentage, you need to know the GST amount and the original cost of the product or service.
GST percentage = (GST amount/Original cost) * 100
Let us look at an example to understand this concept better.
For example, if the original cost of a product is Rs. 100 and the GST amount is Rs. 18, then the GST percentage would be:
GST percentage = (18/100)*100
= 18%
Therefore, the GST rate applicable here is 18%.
How to Calculate For GST Addition
To calculate the final amount chargeable without using a GST calculator, you can use the following GST formula:
Final price = Original Cost + GST amount
Here, the original cost is the cost of the product or service before adding GST to it. The GST amount is the amount of GST chargeable on a product or service.
Let us understand it better by using an example. To calculate the GST amount, you can use the following formula:
GST = (Original cost * GST rate)/100
If the original cost is Rs. 1000 and the GST rate is 18%, then the GST amount will be: (1000*18)/100
= Rs. 180
Final price = Original cost + GST amount
= Rs. 1000+180
= Rs. 1180.
Therefore, the final price calculated by using the GST formula is Rs. 1180.
How to Calculate For GST Removal
To calculate the price of a product or a service before GST was added to it without using a GST calculator, you can use the following GST formula:
Original Cost = Final price / (1 + GST rate/100)
Here, the final price is the cost of an object or service after GST has been added to it. The GST rate is the GST percentage applicable to goods and services based on what they are and where they lie on the tax slab.
Let us look at an example to understand this concept better.
For example, if the final price is Rs. 1200 and the applicable GST rate is 20%, then the original cost of a product before GST was added to it would be:
Original cost = 1200/(1+20/100)
= Rs. 1000
Therefore, the original cost of the product or service before GST was added to it was Rs. 1000. So, you can see now that it is quite simple to calculate GST using the GST formula. However, these things can also be calculated using a GST calculator.
| Formula | Example | |
| Calculation of GST Amount | GST = (Original Cost * GST rate)/100 | Original cost = Rs.100, GST rate = 18% GST = (100*18)/100 = Rs.18 |
| Calculation of GST Percentage | GST percentage = (GST amount / Original cost)*100 | Original cost = Rs.100, GST rate = Rs.18 GST percentage = (18/100)* 100 = 18% |
| Calculation for GST Addition | Final price = Original Cost + GST amount | Original cost = Rs.1000, GST amount = Rs. 180 Final price = 1000 + 180 = Rs.1180 |
| Calculation for GST Removal | Original Cost = Final price (1 + GST rate/100) | If the final price = Rs.1200, GST rate = 20% Original cost = 1200 / (1 + 20/100) = Rs. 1000 |
Percentage of GST in India & Tax Components under GST
| GST Slab | GST Rate(%) | Description |
| 0% | 0 | Essential goods such as food grains, books. |
| 5% | 5 | Items of mass consumption, transport |
| 12% | 12 | Essential goods such as food grains, and books. |
| 18% | 18 | Consumer durables, ACs, refrigerators |
| 28% | 28 | Luxury goods, automobiles, tobacco products |
| Special Rates | Varies | Certain goods like gold, rough diamonds |
Tax components under GST
Under the GST regime, there are three main tax components:
- Central Goods and Services Tax (CGST): Tax levied by the central government on the intra-state supply of goods and services. The revenue collected under CGST goes to the central government.
- State Goods and Service Tax (SGST): It is levied by the state government on the supply of goods and services in the state. The revenue collected under SGST goes to the state government.
- Integrated Goods and Services Tax (IGST): It is levied by the central government on the supply of goods and services. In the case of inter-state transactions, IGST replaces both CGST and SGST. The revenue collected under IGST is shared between the central and state governments.
How to Use GST Calculator?
A GST calculator is a useful tool that can help you calculate the GST amount or the final price of a product or service, which includes the GST. It helps you to calculate these entities accurately and swiftly. This saves you any scope of error and a lot of time.
You can follow these steps to use a GST calculator:
- Know the original cost of the product or the service.
- Find out the applicable GST rate for this product or service. GST rates are different for different products and services based on the type of product it is. This determines where it lies on the tax slab and how much the GST rate for it will be.
- Depending on which calculator you are using, you can now click on the option that reads, “GST Amount” or “Final Price Including GST”.
- Enter the original cost of the product or service you are calculating the GST for.
- Enter the GST rate that applies to the said product or service.
- If you had selected the option titled “GST Amount”, the calculator will now display the amount of GST that is to be charged on the original amount. If you select the option titled “Final Price Including GST”, the GST calculator will display the final price with the GST already added to it.
- Always recheck the result to make sure it is correct.
Benefits of Using GST Calculator
- Accurate Tax Calculation: Ensures precise computation of GST on goods and services, minimizing errors.
- Time-Saving: Quickly calculates GST without manual effort, making it a fast and efficient tool.
- Simplifies Complex Calculations: Handles multiple GST rates (5%, 12%, 18%, 28%) easily, simplifying complex tax structures.
- Business Planning: Helps businesses project GST costs, aiding in price-setting and financial planning.
- Transparency: Provides clear visibility on tax liabilities, helping businesses stay compliant with GST laws.
- User-Friendly: Easy to use for individuals and businesses, regardless of financial expertise.
- Reduces Risk of Penalties: Ensures correct tax amounts, reducing the risk of underpayment or overpayment and avoiding penalties.
CONCLUSION
In this article, we discussed in detail about GST. You get to know what it is, how to calculate GST, what is GST formula, and much more. You also discovered what a GST calculator is and how exactly it can be used. We elaborated on the steps you need to take to operate a GST calculator as well. It is important to know all that you can about GST since it has a direct effect on our finances. You should know how to calculate it accurately to maintain personal financial records, and to make sure that you do not end up having any tax penalties.
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Frequently Asked Questions (FAQ’s)
What are the factors that affect GST calculation?
GST rate: The GST rate is different for different products, it can go from 0% to 28%.
Place of Supply: GST amount will also vary based on the place (same/different states) from which the transaction is happening.
Input Tax Credit: ITC is the amount of credit that a company can claim for the GST they have paid for certain goods and services.
Other Taxes: These taxes may include things like excise duty, customs, etc.
Discounts: If the discount is offered on the original price of a product, then the GST is calculated on the discounted price.
What types of GST are there in India?
In India, there are three types of GST- CGST, SGST, and IGST. CGST and SGST are charged separately by the Central and State governments respectively on the same goods and services. IGST is charged for the movement of goods interstate or between states. These components of GST bring about a difference in the amount of GST payable on a product or service.
What is the GST rate in India?
5%: Goods and items such as packaged foods, clothes below Rs. 1000, books etc. fall under the 5% GST tax slab.
12%: Processed food items, mobile phones, furniture, textiles, etc. fall under the 12% GST tax slab.
18%: Air conditioners, IT services, financial services, hotels and restaurants etc. fall under the 18% tax slab.
28%: Services like cars, luxury items, aerated drinks etc. are included under the 28% tax slab.
Can I use a GST Calculator for multiple products/services at once?
Yes, you can use a GST calculator for multiple products or services at once. A GST calculator allows you to input the details of each product or service, including their respective prices and applicable GST rates. It then calculates the GST amount for each item and provides you with the total GST payable. This simplifies the process of calculating GST for multiple products or services, saving you time and ensuring accuracy in your calculations.
What is the difference between GST calculator and normal calculator?
Accuracy: GST calculations done manually, or normal calculators are prone to errors. A simple typo could lead to GST compliance issues. The GST Calculator ensures accurate calculations by automating the process and eliminating the possibility of manual mistakes.
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