GST-calculator

Understanding The Formula to Calculate GST in India

At the national level, the Government of India imposed the goods and service tax in the form of a tax. You can use various calculators available online to calculate GST on your goods and services. The GST for the goods and service tax gets its concept from the value-added tax.

It means that the customer pays the Goods and Service tax amount that the last dealer charges in the supply chain at every stage. Besides, there are various methods to calculate the tax. This article discusses the GST calculation formula.

Methods of calculating goods and service tax with the help of good and service tax calculator

For the calculation of goods and service tax, you can refer to the below-mentioned formula. The formula will help you calculate the net price of the product after applying the goods and service tax.

  • Add the GST

GST amount would be the (original cost x GST percentage)/100

You would get the net price that equals the GST amount added with the original cost

  • Remove the GST

It will calculate the GST amount as the (original cost x ((100+GST%)/100))). You need to subtract this amount from the original cost.

The net price would be derived once you subtract the GST amount from the original cost.

It would be clear with the help of a simple example. For instance, if you sell a product of 2,000 INR and put a GST of 12% on it. The net price of the product would be 2000 INR + 12%of 2000 INR. It would provide you with the total price or net price of the product that is 2000 INR + 240 INR. You will get a total value that is 2240 INR.

Impacts of product pricing

The goods and service tax became the landmark concerning the taxation system in India. The government implemented the bill intending to eradicate the irregularities and double taxation. On the 29th of March in 2017, the Government of India approved four bills. However, the government provided a deadline of the 1st of July 2017 for completely implementing the goods and service tax bill. Due to this, quite a few products and services become cheaper. At the same time, others went on the heavier side of the price graph.

However, instead of having one simple tax slab, the government coined a multi tire tax slab with different tax rates. The four different tax rates provided by the government include 5%, 12%, 18%, and 28%. Moreover, the government justified the same. Essential services and goods would not come under the taxation system, unlike any luxury services or products.

GST promotes healthy competition among the seller and the manufacturer to provide high-quality goods. It, in turn, helps in boosting the gross domestic product of the country. Besides, a reduction in the tax brings down the cost of production for most manufacturers and increases the sources of finance for entrepreneurs.

Also, it is essential to note in this case that the bill comes with two components. One is the CGST. The centre levies this tax. On the other hand, there is SGST. The State levies this tax. The government approves the rates for each of these taxes based on accessibility and revenue. CGST and SGST would apply to every service and goods. Both the state government and the central government would have the jurisdiction for determining the rate of tax. After implementing the goods and service tax, the retailers, wholesalers, and manufacturers experienced a cost reduction resulting in the overall input tax credit reduction.

GST calculator even works offline while considering the balance in the electronic credit ledger for every tax head, including CGST, IGST, and SGST.

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