Calulate Your GST Now!
Goods and Services Tax, popularly known as GST was introduced in our country on July 1, 2017 with the aim to make India ‘one nation, one market, one tax’.
This was considered to be a major breakthrough on the path of tax consolidation in case of indirect taxes. Though analysts and pundits have come with polarized views about the benefits that have so far accrued from this major tax reform, one thing that is clear is that most people have various doubts about its use and rates.
Therefore, in this article we bring to our users the GST calculator, which is a handy and easy way to calculate GST. Along with this, we will discuss in detail about all the key areas that needs to be known by a potential user.
GST – Key elements
GST refers to the indirect tax levied on the supply of goods and services. It was applicable from July 1, 2017 and subsumed all other indirect taxes prevalent in our country. In a very steadfast approach followed by the Narendra Modi led BJP, the GST Act was passed in the Budget Session in 2017 and was eventually approved by the Parliament on March 29, 2017. Few of the indirect taxes that were replaced were central excise, VAT, sales tax, entry tax, octroi etc.
|Subsumed by GST||Not subsumed by GST|
|Service Tax||Electricity Duty|
|VAT/ Sales Tax||Basic Customs Duty|
|Central Tax||Toll Tax|
|Entertainment Tax||Alcohol for human consumption|
|Tax on Lottery||Property Tax|
|Entry Tax / Octroi|
|Special Additional Duty|
|State Cess & Surcharge|
GST Identification Number: GST is a comprehensive tax and is levied on the manufacture, sale and consumption of goods and services in the country. Therefore, various small and mid sized firms and organizations have to mandatorily have a GST Identification number as per the GST policy.
In case of sales transactions that are made within states i.e. inter-state, the GST that is charged is termed as Integrated GST.
On the other hand, for any intra-state sales, the GST levied is the Central GST and State GST.
In order to get a full picture of GST, we need to be acquainted with different forms of GST that is collected by the government:-
- State GST (SGST): This is collected by the State government;
- Central GST (CGST): This is collected by the Central government;
- Integrated GST (IGST): This tax is collected by the Central government for sales transactions for inter-state transactions and imports;
- Union Territory GST (UTGST): This is collected by the Union Territory government.
GST – Tax rates
For the calculation of GST, it is imperative that the users know all the applicable tax rates under various categories. The different tax slabs are 5%, 12%, 18% and 28%.
Say for example for a particular good or service, the amount is INR 2000 and the applicable GST rate is 12%, then the total amount for the product accrues to INR 2000 plus 12% of INR 2000 i.e. INR 2240.
Some of the popular items included in each tax slab are shown below:-
Items taxed at 5%: Household necessities such as edible oil, tea, coffee, sugar, spices etc.
Items taxed at 12%: Includes computers and processed foods;
Items taxed at 18%: Hair oil, toothpaste and soaps, capital goods and industrial intermediaries etc;
Items taxed at 28%: Luxury items are taxed here such as small cars, consumer durables, ACs, refrigerators, premium cars, cigarettes and aerated drinks, high CC motorcycles etc.
How to Use the GST Calculator?
Groww has come up with the GST calculator that helps us know the GST. We can calculate it using the following procedures:-
Step 1: Select whether the amount is inclusive or exclusive of the GST rate;
Step 2: Enter the original amount of the bill;
Step 3: Now we need to select the GST rate from the drop down menu (5%/ 12%/ 18% or 28%);
Step 4: Click on the Calculate button. The result appearing will show the total GST amount along with Pre-GST or Post-GST amount as per the requirement.
Note: GST inclusive amount is the total value of the good or service after including the GST amount. So GST inclusive amount is the sum of original value of the product plus the GST calculated on the same.
On the other hand, GST exclusive as the name suggests is the value of the product after subtracting the GST amount from the GST inclusive value of the product.
Following the steps discussed above helps us calculate the GST amount easily.
GST Calculation Formula
For calculating GST, we can use the following formula:
1.Adding GST to the Base Amount
GST Amount = (Original Cost of the good/service * GST %) / 100
Net Price = Original cost of the good/service + GST Amount
2. Removing GST From the Base Amount
GST Amount = Original Cost of the good/service – (Original Cost * (100/ (100 + GST %))
Net Price = Original Cost of the good/service – GST Amount
Advantages of GST (In comparison to earlier indirect taxes)
The following are the advantages of GST as compared to other indirect taxes:-
- GST eliminates the cascading effects of taxation as it has subsumed all other indirect taxes. Also in the long run it is believed that the GST rates will be simplified further thereby reducing the costs even further in the long run;
- GST has helped improve the transparency in the tax system as the rules are stringent and have to be adhered to within deadlines. It has also brought uniformity in the taxation process and also allows centralized legislation;
- The unorganized sector has come into the tax net post the implementation of GST due to greater accountability. A large percentage of various sectors and industries in India are present in the unorganized sector. GST by its rules and litigation has helped lessen the gap of the organized and unorganized sectors in the economy;
- The amount of indirect taxes in government’s kitty has increased exponentially post the implementation of GST;
- The logistics sector in India has improved a lot and waiting time for vehicles in case of inter-state transfers has come down drastically (Because GST has eliminated border taxes and has also helped in resolving check-post discrepancies). This has thereby increased the productivity of companies and economy at large.
Though there have been a number of advantages few of the disadvantages that have come at the forefront are that GST is not a simple procedure to follow and thousands of small and medium sized enterprises that to have the brunt.
Another disadvantage is that the number of filings has increased thereby boiling up to more software costs and increasing the time required for compliance.
However, in the long run it is estimated that GST will be a positive for the economy and will add between 1% – 1.5% to the GDP of the country (As per IMF estimates).
What Is Reverse GST?
As the name suggests, Reverse GST is a mechanism wherein the person or the consumer who is receiving the good or service will be liable to pay the taxes instead of the supplier of the good/ service. In normal cases, it is the supplier that has to pay the taxes. However, in case of Reverse GST the chargeability gets reversed.
However, there are conditions applicable based on which Reverse charge is applicable. These are discussed below:-
- Supply of goods from an unregistered dealer to a registered dealer: When a vendor who is not registered under GST transfers goods to a registered dealer, the reverse charge would be applicable. The GST in this case will be paid directly by the receiver to the Government. This is an anti-tax evasion measure to ensure that transactions by unregistered dealers don’t get unaccounted.
- If an e-commerce operator supplies service then reverse charge would be applicable. Here, the e-commerce operator will have to pay GST.
- Apart from the two conditions mentioned above, there is a list of goods and services which the CBEC (Central Board of Excise and Customs) has issued on which reverse charge would not be applicable.
Example of GST Calculation
We have covered most aspects of GST, however just to get the calculation or the benefit that will be derived from GST crystal clear on the minds of the investors, we shall take an example.
We have divided our example into three stages:
Stage 1: At the time of Manufacturing
Let us consider the cost of a product that costs INR 1000 and the applicable tax rate is 12%. The manufacturer buys the raw material worth INR 1000 inclusive of the GST of 120 (12% of INR 1000).
He then for his profit adds a value of say INR 200. This brings the total value of the product at INR 1200. The total tax amount in this case is INR 144.
In the previous tax structure, the manufacturer used to pay the entire tax i.e. INR 144. However, in case of GST he can set it off from the tax already paid off while purchasing the raw materials. Therefore, his net liability now is (INR 144 – INR 120 = INR 24).
Stage 2: Wholesale
Here the cost of the product is INR 1200 and the amount of tax paid by the wholesaler while purchasing the good is INR 144 (12% of INR 1200).
Now the wholesaler adds his value say INR 200, thereby driving the cost of the product to INR 1400. Therefore the total GST on this amount sums up to INR 168.
Just like the manufacturer, the wholesaler too can set off the taxes paid by him. Therefore, the effective tax that he has to pay now is (INR 168 – INR 144 = INR 24).
Stage 3: Retailer
At the final stage, the retailer buys the product from the wholesaler at INR 1400 which includes GST of INR 168. The retailer then adds his margin on the product to the tune of INR 200.
The total price of the product now comes up to INR 1600 and the applicable tax is INR 192 (12% on INR 1600). This is the ultimate price of the good meaning a consumer will have to pay INR 1600 to purchase this good. As was done in the previous stages, the retailer can offset the taxes paid by him such that the total GST incidence paid by him attunes to (INR 192 – INR 168 = INR 24).
Eventually, the GST paid by the final consumer of the good is INR 192. Given we had followed the previous tax structure, the taxes would have been much high. Thus GST can be a win-win scenario that will benefit us eventually as it reduces the tax burden by affecting the amount of taxes paid at each stage of value chain.
Though GST had some initial hiccups, in the long run it has the potential to provide immense benefit. There are numerous benefits that have already been discussed. But as a consumer the best thing that has happened for us is that the ultimate tax that we need to pay has come down.
The GST calculator presented here is an efficient tool that helps us calculate our tax burden. Given its advantage of user friendliness, we can make full use of the same without hiring any professional help to do the job.
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