What is GST?

Good and Services Tax popularly known as GST is an indirect tax levied on the goods and services supplied in India. It is a multi-stage combined tax which is levied based on the destination and is levied for every value addition. The effective date of GST is 1.07.2017. The introduction of GST replaced many indirect taxes in the country. There are five different tax rates for goods and services under GST i.e., 0%, 5%, 12%, 18%, and 28%. Some of the products like alcoholic drinks, petroleum and electricity are out of the purview of GST and the tax is levied by individual state Governments on these products as per the earlier regime.

GST Categories

The four categories of GST are:

  • CGST (Central Goods and Services Tax)
  • IGST (Integrated Goods and Services Tax)
  • SGST (State Goods and Services Tax)
  • UGST (Union Territory Goods and Services Tax)

If the supply of goods and services pertains to a place which is in a different state from the state of the supplier IGST is applicable. If the supply of goods and services pertains to a location which is in the same state as that of the supplier, then CGST and SGST will be applied equally which amounts to 50% of the IGST applicable.

GST Calculator

GST Calculator is an online tool to calculate the GST payable for a month or a quarter.

What are the Advantages of a GST Calculator?

Using a GST Calculator has many advantages. Some of these are listed below:

  • The gross or net product price with the percentage-based GST rates can be calculated easily with the GST Calculator.
  • It gives an accurate bifurcation between the CGST and SGST and helps in computing the accurate IGST.
  • This is a tool which simplifies the calculation of GST and saves on time
  • It also mitigates the possibility of calculation errors and lends accuracy to your work especially when there are too many invoices involved.

What is the Procedure to Calculate GST Using a GST Calculator?

To calculate GST using the GST Calculator you should follow a few simple steps:

  • Key in the net price of the goods or services
  • Provide the GST rate 5%, 12%, 18%, or 26%
  • Now click on the calculate button
  • The GST Calculator will clearly display the CGST, SGST, and IGST as applicable. The gross price of the goods/services after including GST will also be shown. The gross amount shown should be the amount that has to be billed.

What is the Formula for the Calculation of GST?

The GST calculation formula is very simple. Any person who is into manufacturing, retail, and wholesale business or who is a service provider can calculate the GST very easily.

The formula for calculating GST is:

For calculation of GST for a supply where GST is to be excluded:

GST Amount = (Value of the supply x GST%)/100

Price to be charged: Value of supply + GST Amount

The formula for calculation of GST where the supply includes GST:

GST Amount = (Value of supply {100/(100+GST%)}

How Has the GST Impacted the Pricing of Products?

The range of GST is from 0% to 28%. The products and services are listed under five tax slabs. The slabs are 0%, 5%, 12%, 18% and 28%. The slabs are based on the category of the product. Essential goods, i.e., goods that are used by the customers on a regular basis have no tax at all and the luxury items fall under the highest tax slab, i.e., 28%.

Earlier, i.e., when the concept of GST was introduced, the Government had intentions of keeping the tax close to the original rate. Some of the products came under the higher tax slab, that is, 18% and 28%. However, after studying the list of products, some of the products were designated as essential commodities and were kept at a low tax slab and some of them designated as luxury items were kept under the higher tax slab, i.e., between 18% and 28%.

Given below is a list of items under the different tax slabs with a comparison of the old rate:

Commodity Existing Rate Earlier Rate

Raw material for broom

Nil

12%

 

Carpets, Coverings, Carpets that are handmade

5%

12%

Slide Fastener and zip

12%

18%

Vacuum Cleaners

18%

28%

Washing Machines

18%

28%

Hair Cleaners

18%

28%

Marine Engine

5%

28%

Stone, Marble, Wood deities

Nil

5%

Sanitary Napkins

Nil

18%

Special Purpose Motor Vehicles

18%

28%

Toilet Sprays

18%

28%

Hair Dryers

18%

28%

Deodorants

18%

28%

E-book supplies

5%

18%

Given below are examples showing various GST calculations:

A Simple GST Calculation

Details Rate in % Amount

Value of Invoice

 

1,50,000

GST

18%

27,000

Billing Price

 

1,77,000

GST Calculation Method for Manufacturers

Details Rate in % Pre-GST Amount Amount after GST

Product Cost

 

2,50,000

2,50,000

Excise Duty

12.50%

31,250

Nil

Profit

15%

37,500

37,500

Total

 

3,18,750

2,87,500

VAT

12.50%

39,844

Nil

CGST

6%

 

17,250

 

SGST

6%

 

17,250

 

 

 

3,58,594

3,22,000

The manufacturers supply the product to the wholesaler and the wholesaler to the retailer and the retailer to the consumer. Now, after the introduction of GST, as seen in the above table, the manufacturer makes saving to the 10.50% and this will be passed on to the wholesaler to retailer and finally to the consumer. So, the introduction of GST will make the same product available at a lesser price for the consumer.

GST Calculation by Wholesalers and Retailers

Details Rate in % Pre-GST Amount Amount after GST

Product Cost

 

3,58,594

3,22,000

Profit

12%

43,031

38,640

Total

 

4,01,625

3,60,640

VAT

12%

48,195

Nil

CGST

6%

 

21,638

SGST

6%

 

21,638

Total

 

  4,49,820

4,03,916

The decline in the cost of the end product is as shown in the table above. By the introduction of GST, which has abolished many of the indirect taxes, the product is available at a lower price for the consumer.

With the GST Calculator, the net GST liability payable and the utilisation of GST input credit can be calculated. The net GST liability is calculated after considering the electronic credit ledger balances for individual tax head, i.e., IGST, CGST, SGST, and UTGST.

Details of GST Bill Rates and Calculation

The introduction of GST Bill has created a history in the reforms of taxation rules in the country. The objective of the GST Bill was to combine all the various taxes at different levels into one single tax, thus avoiding the confusion of taxation. It was clear that essential commodities cannot have the same tax rate as luxury items. So, based on the utility and necessity aspect the commodities were segregated into different categories and the tax was fixed at 5 different rates, i.e., 0%, 5%, 12%, 18%, and 28%.

Given below is a list of items that fall into various tax rate slabs:

Tax Slab Commodities

0%

This rate is applicable to commodities that are required for consumption on a daily basis like milk, salt, fresh fruits and vegetables, bread, etc.

5%

This rate is applicable for commodities that are commonly used like the postage stamps, packaged food items, ayurvedic medicines, etc.

12%

Umbrella, sewing machine, cutlery, milk products, all come under the 12% slab

18%

Commodities that are considered as luxury items like granite, refrigerators, washing machines, deodorant, hair dryer, vacuum cleaners, etc., come under this tax slab.

28%

The commodities that fall under this category are also luxury items like motor vehicles, cigarettes, automobile parts, etc.

FAQs on GST

Where was GST first introduced?

France was the first country where GST was introduced in the year 1954.

If there is a discount on a commodity, is the GST applied after the discount?

It is clearly stated in Section 15 of the CGST Act, 2017 that no discount will be included in the value of the supply if:

  • The discount has been recorded in connection with the supply on or before the supply
  • If such terms have been given on account of an agreement entered into before the supply is made or at the time of the supply and if linked to the invoices pertaining to the supply and all this only after the supply has been effected.
  • After effecting the supply, if the discount can be attributed to the input credit based on the document issued by the supplier and has been reversed by the beneficiary of such supply.

How does the introduction of GST contribute to the reduction in the final price of the commodity?

Given below is a calculation that endorses the fact that the introduction of GST has resulted in the reduction in the final price of the commodity:

Pre-GST Calculation Post GST Calculation

The commodity is supplied from Bangalore to Chennai at 2,500

The commodity is supplied from Bangalore to Chennai at 2,500

10% Vat = 250

5% CGST = 125 and 5% SGST = 125

 

The commodity is supplied from Chennai to Mumbai at a cost price of 2,750

Profit at 500 will make the sale price at Mumbai = 3,250

The commodity is supplied from Chennai to Mumbai at a cost price of 2,750 and the profit at 500 will make the sale price at Mumbai = 3,250

10% Central Sales Tax on 3,250 will be 325

10% IGST is 75, i.e., 325 minus 125 CGST and 125 SGST

The final cost of the product is 3,575

The final cost of the product is 3,325

What does GST inclusive amount refer to?

GST inclusive amount means that GST is already added to the original cost of the product and is not separately collected from the consumer.

What does GST exclusive amount refer to?

The amount arrived at by deducting the GST value from the GST inclusive value is the GST exclusive amount.

If a food product is manufactured by a person and sold in the restaurant being run by the same person, what would be the GST charged? Should it be as GST for a manufacturer or at 5% as a service provider?

If the food product sold is a packaged one, then it is treated as manufacture and GST will be charged at 2%. But for the supplies made at the restaurant will be charged at 5%.

An exporter is offering services which are exempted from tax but is paying GST on services availed. Can refund for the GST paid on input services be claimed?

Yes, a refund of GST paid on input services can be claimed.

Is GST calculation on gold jewellery different from GST calculation on other commodities?

The GST calculation on gold jewellery includes the GST on the alloys which are used to make the jewellery strong. The GST on these alloys ranges from 30 to 60. So if the price of gold is 3,000 per gram then the GST on per gram 22-carat gold will be 3000 x 22/24 = 2,750 per gram. The retail price will be 2750 + 60 (cost of the alloy) = 2,810. GST at 3% will be calculated on 2,810 to arrive at the final price.

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