GST stands for Goods and Services Tax which has been levied by the govt of India at the national level. Online GST calculators which are offered by several third-party websites has to be used to ascertain the price of GST which is applicable.

For more information, Check out related articles GST Registration and GST Return

GST is that the Goods and Services Tax levied by the govt of India on the manufacturers, sellers, and consumers of consumption goods and services at the national level. It is based on the principle of Value Added Tax (VAT). As GST is levied on value addition at each stage, a consumer needs to pay only the GST charged by the last dealer or supplier within the supply chain.

How to Calculate GST using a GST Calculator?

Taxpayers are now knowledgeable about the number of tax charged at each point of supply for products and services because of the implementation of GST. When calculating GST, taxpayers must remember of the GST rates applicable to different categories. Under the new tax format, the rates applicable are 5%, 12%, 18% and 28%.

GST Calculation Formula

The below mentioned formula is calculating for GST by taxpayer

Formula for GST calculation:

    • Add GST:

GST Amount = (Original Cost x GST%)/100

Net Price = Original Cost + GST Amount

    • Remove GST:

GST Cost = Original Cost – [Original Cost x {100/(100+GST%)}]

Net Price = Original Cost – GST Amount

Example of GST Calculation

In case a product is sold for Rs.2,000 and therefore the GST rate applicable thereto is 12%, then net price of the merchandise are Rs.2,000 + 12% of Rs.2,000 = Rs.2,000 + Rs.240 = Rs.2,240.

Tax Calculation under GST

Under the GST regime, manufacturers and dealers can enjoy input tax reduction. Below is an example to indicate the difference in the amount of tax payable under the old legal system and therefore the GST system:

Value to Manufacturer Old Tax system GST System
Cost of production Rs.2,00,000 Rs.2,00,000
Profit Margin of 10% Rs.20,000 Rs.20,000
Excise duty of 12% Rs.24,000
Total production cost Rs.2,44,000 Rs.2,20,000
VAT of 12.5% Rs.30,500
SGST of 6% Rs.13,200
CGST of 6% Rs.13,200
Invoice value for manufacturer Rs.2,74,500 Rs.2,46,400
Value to Wholesaler
Cost of goods Rs.2,74,500 Rs.2,46,400
Profit margin of 10% Rs.27,450 Rs.24,640
Total Value Rs.3,01,950 Rs.2,71,040
VAT of 12.5% Rs.37,743.75
SGST of 6% Rs.16,262.40
CGST of 6% Rs.16,262.40
Invoice value to wholesaler Rs.3,39,693.75 Rs.3,03,564.80
Value to Retailer
Cost of goods Rs.3,39,693.75 Rs.3,03,564.80
Profit margin of 10% Rs.33,969.375 Rs.30,356.48
Total Value Rs.3,73,663.125 Rs.3,33,921.28
VAT of 12.5% Rs.46,708
SGST of 6% Rs.20,035.28
CGST of 6% Rs.20,035.28
Invoice value to retailer Rs.4,20,371.125 Rs.3,73,991.84

Impact of GST on Product Pricing

Indirect tax are levied by Central and State government called Central GST (CGST) and State GST (SGST), respectively. In the case of intra-state transactions, the seller will collect CGST and SGST from the customer which may be paid to the Central and government , respectively. Here are some examples of the impact of GST on product pricing:

Old Tax System GST System
Price of a product sold from Pune to Raipur = Rs.1,000 Price of a product sold from Pune to Raipur = Rs.1,000
VAT @ 10% = Rs.100 CGST @ 5% = Rs.50.00 + SGST @ 5% = Rs.50.00
Cost of a product sold from Pune to Raipur = Rs.1,100 Cost of a product sold from Pune to Raipur = Rs.1,100
Profit = Rs.1,000 Profit = Rs.1,000
Selling Price = Rs.2,100 Selling Price = Rs.2,100
CGST @ 10% = Rs.210 IGST @ 10% = Rs.110
Total cost of the merchandise = Rs.2,310 Total cost of the merchandise = Rs.2,210

GST Bill Rates and Its Calculation

The GST Bill is touted to be a landmark bill with respect to taxation in India. This Bill is being implemented with the intention of curbing ‘double-taxation’ and irregularities regarding the same. On 29 March, 2017 four bills were approved. The government has set a deadline of 1, July 2017 for the complete implementation of this Bill. A number of products and services would become cheaper et al. would become heavier on the wallet. However, rather than the expected taxation slab, a multi-tier tax slab has been put forth with four different tax rates of fifty , 12%, 18% and 28%. The justification behind this multi-tier system is that essential goods and services can’t be taxed at an equivalent rate as luxury products and services.

However, there are variety of confusions and doubts regarding the calculation of GST on products and therefore the difference that will be made with the implementation of this landmark Bill. It is essential to note that the GST Bill has two components to it – one that is levied by the Centre which is known as CGST or Central GST and the other which is levied by all States known as SGST or State GST. Rates for every product would be approved based on revenue and acceptability, among other factors. Except for those goods and services that are exempted, SGST and CGST are applicable on all goods and services. Both Centre and States would have jurisdiction for the determination of tax rates and for all taxpayers based on the edge for products and services that are prescribed.

Income Tax Calculator

From the example, it’s clear that subsuming excise duty is favourable to the end consumer. There is a discount in cost for manufacturers, wholesalers, and retailers because of the subsuming of VAT, Service Tax, and Excise duty. Due to the reduction in cost, there’ll be a discount in input tax reduction.

Tax Calculation for Inter-State Sales

Integrated GST (IGST) will be levied by the Central Government on inter-state supply of goods and services. In the case of inter-state transactions, IGST will be transferred to importing state. In the old legal system , CST was charged over and above VAT and therefore the excise duty for movement of products between 2 states. In the GST system, IGST is that the only tax levied on goods moving across state borders. Below is an example to understand the IGST system:

Value to Manufacturer Old Tax System GST System
Cost of goods Rs.1,00,000 Rs.1,00,000
VAT of 12.5% Rs.12,500
IGST of 12% Rs.12,000
CST of 2% Rs.2,250
Total value to retailer Rs.1,14,500 Rs.1,12,000

As per the above example, it’s clear that under the GST system, manufacturers, wholesalers, and retailers will see reduction in cost whether it’s inter-state or intra-state sales.

Benefits of GST Calculator

Here are a number of the key benefits of applying a GST calculator:

  • It enables users to see the net or gross product price on GST rates.
  • It enables users to differentiate between IGST, CGST and SGST and calculate each tax accurately.
  • It saves time by providing instant results.
  • It lowers the risk of human error when calculating the price of products and services.
  • It is simple to use and helps you calculate GST during a hassle-free manner.

General Benefits of implementing GST in India

Implementing a single indirect tax is beneficial in many ways such as:

  • It not only helps in setting a global standard but also ensures transparency throughout the tax structure right from the manufacturer to the buyer.
  • The primary objective of implementing GST is to stop double taxation of economic goods. GST is predicted to ultimately increase competition among the manufacturers and sellers to produce high-quality goods which successively will boost the GDP of the country.
  • The reduce in tax will bring down the manufacturing cost for companies. Thus, increase the competition among exporters.
  • Inflation is predicted to decrease after the implementation of GST.
  • It is also said that there’ll be a decrease in liabilities . Reduction in price is predicted as input tax reduction is out there against output tax. Following taxes are set-off with an equivalent or with the various tax input credits
CGST CGST and IGST
SGST SGST and IGST
IGST IGST , CGST and SGST

Changes

  • As observed in the previous examples, there are some changes noted in the sort of tax and amount imposed.
  • Excise is usually applicable on capital goods during production utilized by manufacturer. Under the new Bill, excise on capital goods are subsumed as there’ll only be one rate of tax for every sort of product.
  • Due to the subsuming of Service Tax, VAT, Excise, there’ll be a fall in the cost of wholesalers, manufacturers and retailers. This will successively reduce the entire cost to the manufacturer because of discount in procurement cost.
  • There will also be a fall in input tax credit for the retailer/wholesaler under GST.

Therefore, as observed there will be a fall in prices for the manufacturer. However, changes in GST rates will depend upon the products and services.

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