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How to Calculate GST in India with Example?

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Last Updated on July 9, 2024 by Kanakkupillai

The Goods and Services Tax (GST) has completely changed how businesses work in India. It has eliminated the previous system of various taxes and made the tax collection procedure simpler. Given that it is a uniform tax that is imposed at every point in the supply chain, the GST registration has also increased the tax system’s transparency and efficiency. As a result, the overall tax burden on enterprises has decreased, and the cascading impact of taxes has been eliminated. Due to its need for businesses to keep accurate records and submit timely returns, the GST has also promoted compliance and decreased tax evasion.

However, such simplicity also raises the bar for precision in GST computations. To comply with tax regulations and avoid penalties, businesses must calculate GST correctly. This is where an online GST calculator comes in handy. One may quickly ascertain which tax band their transaction comes under and how much tax will be levied on the goods or services they are selling or purchasing by using the GST Tax calculator Online. Simply enter the net price and GST rate to obtain further information, such as the gross price and tax amount. It is simple to use. As a result, we shall examine the GST calculator process and GST components in this article using certain instances.

Understanding GST Components

In India, there are four different types of GST taxes: IGST, SGST, CGST, and UTGST. The government has also established several tax rates for each of them, which will be used to calculate the tax due on goods and/or services carried out.

CGST (Central Goods and Services Tax)

The CGST is a tax within the GST system that is applied to intrastate (inside the same state) transactions, similar to state GST. The CGST Act sets forth rules for the CGST. The Central Government is responsible for collecting the CGST income. Section 15 of the CGST Act applies a tax on the transaction value of the provided goods or services, which is the price paid or owed for a dispute-related supply.

SGST (State Goods and Services Tax)

According to the State Goods and Services Act of 2017, SGST, an indirect tax imposed on the intrastate supply of goods and services, is assessed by the state government of the relevant state. Similar to CGST, SGST is assessed on the transaction value of the products or services provided under section 15. Additionally, in accordance with Sections 12 and 13 of the SGST Act, the CGST part will also be assessed in accordance with the SGST portion at the time that goods or services are supplied.

IGST (Integrated Goods and Services Tax)

The IGST is also levied on the supply of products and services which is between two states as well ason imports and exports. According to the IGST Act, the Central Government oversees and collects the IGST. The Central Government then divides the total tax among the corresponding states.

UTGST (Union Territory Goods and Services Tax)

Another indirect tax, known as UTGST, is levied and collected by each Union Territory in accordance with the UTGST, 2017, on the supply of goods and services within its borders. Alcoholic beverages intended for human consumption are not included in the list of goods subject to UTGST. In the Union Territories of Chandigarh, Dadra and Nagar Haveli, Daman and Diu, and Lakshadweep, as well as the Andaman and Nicobar Islands, UTGST is applicable to deliveries of goods and services. The Union Territory government is in charge of collecting the UTGST revenues. The UTGST takes the place of the SGST in Union Territories. The UTGST will, therefore, be applied in Union Territories alongside the CGST.

GST Calculation Methodology

The CGST, SGST, and IGST calculator aids in dividing taxes into their respective rates. You may determine which tax bracket your transaction falls under and how much tax will be charged on the goods or services you are selling or buying by using a GST calculator.

The online GST calculator has made calculating GST quite simple. However, it simply determines the overall GST. It will be necessary for you to divide up CGST and SGST. To get the CGST and SGST for an intrastate sale, divide the result by 2. In the case of an interstate sale, the IGST is included in the final sum and does not require division.

Step 1: Determine the GST Rate

The new tax system allows taxpayers to learn more about the various GST rates that apply to certain categories. These are required when calculating GST and are 0%, 5%, 12%, 18%, and 28% respectively.

Step 2: Calculate the GST Amount

The taxpayer may use the formula shown below to calculate GST. The formula below makes it easy to determine a product’s net price after applying GST and subtracting GST as well.

Use the calculation shown below to determine the GST due on a transaction:

The total cost of the transaction can then be determined by increasing the original cost by the GST amount:

Depending on whether a transaction is intrastate or interstate, a different GST rate will be applied. The following equations can be applied to intrastate transactions:

Remove GST:

Nevertheless, a reverse GST calculator will be required to be used when a price inclusive is specified. This will likewise be based on a straightforward formula, much like the previous one:

Step 3: Compute Total Invoice Value

Every registered person is required to pay the difference between the GST on sales and the GST on purchases made within a given month. By multiplying the taxable amount by the GST rate, one may calculate GST.

GST Inclusive

Considering this total includes GST, enter the invoice value—that is, the product’s price after GST—in this field. You will be given the GST amount as well as the pre-GST amount or the amount before the GST.

The overall cost is Rs. 500 and the GST rate is 5%

GST Exclusive

Enter the taxable value—that is, the real cost of the commodity without GST—since the amount is exclusive of GST. It will display both the GST and post-GST amounts or the amount after the GST.

GST excluding amount = = 500

It is estimated on the basis of transaction value rather than MRP.

Example Calculation of GST

An easy example of how business owners often compute the GST

Particulars Rate (%) Amount
Invoice value 12% 2,00,000
GST 12,000
Price to be charged on the Invoice 2,24,000

Manufacturers and dealers can take advantage of input tax credits under the GST system. This makes the GST system more appealing because it lowers their overall tax obligation and encourages cost savings. The following example of the difference between the amount of tax payable based on the old tax system and the GST system is provided below:

Particulars

(Manufacturer’s Price)

Rate Pricing Before GST(₹) Pricing includes GST(₹)
Cost of the product 2,50,000 2,50,000
Profit 10% 25,000 25,000
Excise Duty 12% 30,000
Totalcost of the product 3,05,000 2,75,000
VAT 12.5% 38,125
CGST 6% 16,500
SGST 6% 16,500
Invoice price for Manufacturer 3,43,125 3,08,000
Wholesaler’s Price
Cost of the product 34,3125 3,08,000
Profit 10% 34,312.5 30,800
Total cost of the product 3,77,437.5 3,38,800
VAT 12.5% 47,180
CGST 6% 20,328
SGST 6% 20,328
Invoice price for Wholesaler 4,24,617.5 3,79,456
Retailer’s Price
Cost of the product 4,24,617.5 3,79,456
Profit 10% 42,462 37,946
Total cost of the product 4,67,079.5 4,17,402
VAT 12.5% 58,385
CGST 6% 25,044
SGST 6% 25,044
Invoice price for Retailer 5,25,465 4,67,490

Conclusion

For Indian companies to adhere to tax regulations, avoid fines, and retain positive business connections with clients and suppliers, accurate GST calculations are necessary. They may also have an effect on a company’s pricing, tax planning, and profit margins. The calculator is affordable, simple to use, adaptable, and mobile-friendly. It is a useful tool for companies that deal with a variety of goods and services and need to calculate GST in a precise and legal manner. Furthermore, keeping precise GST calculations helps firms establish credibility and trust with tax authorities, which can result in audits that go more smoothly and future issues that are less complicated.

Businesses can ensure the accuracy of GST calculations and maintain an edge in a combative business market by maintaining correct records, getting expert assistance, and employing GST software. Kanakkupillai will lend a hand if you need assistance with GST calculations. As a reputable supplier of GST services, Kanakkupillai can help companies through the complexity of GST calculations. Businesses can concentrate on their main operations while still adhering to tax laws with the assistance of our expertise. Additionally, Kanakkupillai’s attentive service and prompt assistance makes an excellent partner for any company needing help with GST calculations.

Kanakkupillai

Kanakkupillai is your reliable partner for every step of your business journey in India. We offer reasonable and expert assistance to ensure legal compliance, covering business registration, tax compliance, accounting and bookkeeping, and intellectual property protection. Let us help you navigate the complex legal and regulatory requirements so you can focus on growing your business. Contact us today to learn more.