How to Calculate GST: Simple Formula India is a rapidly growing country, and Goods and Services Tax (GST) plays a very important role in India. Citizens have knowledge of GST, but they do not know how to calculate it. There are different types of GST, and people who understand the calculation steps make some common mistakes that they must avoid. Let's understand all about the GST calculation. GST Rate Slabs In India GST Rate Slab Applicable To 0% This rate applies to daily life products we use such as , packaged paneer, milk, bread, biscuits etc. 5% This rate applies to daily essentials, toiletries, packaged foods etc 18% This standard rate applies to electronic items, small cars (350 cc) , cement, etc 40% This rate applies to luxury items such as high price vehicles , tobacco ,etc.
GST Calculation Process Calculating GST is not difficult; there are only two simple formulas you should know: Exclusive and Inclusive.
Exclusive: We have to add GST in the exclusive formula because the price is given without GST included.
Example
Mayara purchased a product for rs 2,300 , and the GST rate is 18%
Step 1: Calculate GST Amount
GST Amount = (Original Price × GST Rate) / 100
GST Amount
2,300 ×18 / 100
2,300 × 0.18
Rs 414
Step 2: Calculate Final Price
Final Price = (Original Price + GST Amount)
Final Price
2,300 + 414
Rs 2,714
Final Answer
GST Amount = Rs 414
Final Price (after adding GST) = Rs 2,714
Inclusive: In the inclusive formula, GST is already included in the price, so we have to remove the GST to find the original price, like Maximum Retail Price (MRP). We have separately calculated both the base price and GST.
Example
Arnav purchased a product for Rs 3,100 , and the GST rate is 18%
This price of Rs 3,100 is inclusive of GST.
Step 1: Final Original Price (Without GST)
GST Amount = (Total Price - Total Price × 100 / (100 + GST Rate )
Original Price
3,100 / 1.18
Rs 2,627.12 (approx)
Step 2: Calculate GST Amount
Base Price = Total Price - GST Amount
GST Amount
3,100 - 2,627.12
Rs 472.88 (approx)
Final Answer
Original Price (Without GST) = Rs 2,627.12
GST Amount = Rs 472.88
Total Inclusive Price Paid = Rs 3,100
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How Many Types of GST In India There are four different types of GST in India, and both the Central Government and State Government collect tax. Understand all four types one by one;
Central Goods and Services Tax (CGST)
State Goods and Services Tax (SGST)
Integrated Goods and Services Tax (IGST)
Union Territory Goods and Services Tax (UTGST)
Central Goods and Services Tax (CGST) When a product or service is sold in the same state, then it comes under Central Goods and Services Tax (CGST), and this tax is collected by the Central Government of India.Whenever a shopkeeper sells their products or services in the same state, the GST is divided into two parts : half CGST and half SGST ; both taxes are mostly similar to each other. Every registered business must file their details in the inter-state slab in the CGST return on a regular basis. If any goods fall under the 18% slab, then 9% CGST applies, and if the products fall under the 5% slab , then 2.5% CGST is applied.
Understand with an Example: Raghu is a shopkeeper in Rajasthan, and he sells his products or services in his state. One day , a customer named Riya came into his shop and purchased Rs 10,000 worth of products. Now, these goods fall under the 18% slab, for which 9% CGST and 9% SGST will apply.
State Goods and Services Tax (SGST) State Goods and Services Tax SGST means when the goods or services are sold in the same state, and this tax collected by State Government of India. This is the same as CGST ; if any products fall under the 18% GST slab, then 9% SGST applies, and if product fall under the 5% slab then 2.5% applies. In monthly returns, every business must file their report.
Understand with an Example: A shopkeeper named Viyan from MP and he sells products in MP. It means that when the sale happens in the same state, then the items come under the 5% slab.
Integrated Goods and Services Tax (IGST) Integrated Goods and Services Tax (IGST) applies when the products or services are sent to a different state, and this tax is collected by the Central Government and shared with the State Government. The entire IGST is charged to the customer if any items come under 18% slab.
Understand with an Example: A seller from Madhya Pradesh sends his goods to a customer in Uttar Pradesh. Here, the sale is happening from one state to another , which is why the entire tax will be charged in the form of IGST. The total GST applicable on the customer will be charged as IGST.
Union Territory Goods and Services Tax (UTGST) Union Territory Goods and Services Tax (UTGST) only applies to Union Territories where there is no State Government. UTGST is the same as SGST; the only difference is that this tax is collected only by the authority of the Union Territory. Whenever a sale takes place within a UT , GST is divided into two parts - half CGST and half UTGST.
UTs where UTGST applies:
Chandigarh, Andaman and Nicobar, Lakshadweep, Dadra and Nagar Haveli, Puducherry, Ladakh, (Delhi is special case - here SGST applied, not UTGST)
Understand with an Example: A shopkeeper Ramu from Lakshadweep sells his products within Lakshadweep. Because the sale is happening under the UT, the GST is divided into two parts : half CGST, and half UTGST. Combine both taxes to determine for the final GST for the customer.
Conclusion GST calculation is not very difficult ; it's very simple. You only need to know the inclusive and exclusive formulas. When you understand these two formulas, anyone can easily calculate GST. If you also understand the types and GST rate slabs, then the calculation is also easy.
FAQ 1 Why do products become more expensive after adding GST? GST is a value added tax in which a percentage is added to the price . If products fall under 18% slab, then the price of that automatically increases. Thus, the final MRP is always a little more expensive for customers.
2 Does GST apply to all products? No, there are some essential items where no GST rate is charged, such as daily essentials products, milk, fresh fruits , vegetables, notebooks, etc.
3 Who takes the IGST benefits seller or State? IGST is collected by the Central Government of India, which then transfers its share to the State Government. This keeps interstate trade smooth, and the seller does not have the tension of filing returns in different states.
4 When is it important for businesses to obtain a GST number (GSTIN) ? If any business’s annual turnover exceeds Rs 40 lakh (in the service sector, Rs 20 lakh), then GST registration is mandatory. After the registration, businesses must file GST returns every month and provide proper invoices.
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