Understanding How GST is Calculated on Goods and Services

Knowing how to compute the same using GST calculator is paramount as GST impacts your business in several ways.

In an attempt to remove the cascading effect of multiple indirect taxes in the Indian economy, the Central Government introduced Goods and Services Tax. It is a unified taxation regime. This uniformity has had a significant impact on the cost of goods and services and eradicated the complicated tax-on-tax system followed before.

Following the implementation of this taxation system and diminishing exchange costs, various government endeavors like the ‘Make in India’ crusade received a stimulus. Knowing how to compute the same using GST calculator is paramount as GST impacts your business in several ways.

This comprehensive tax is levied on consumption, sale and manufacturing of goods and services across all industries irrespective of their area of operation. Before its implementation, individuals failed to have a transparent notion about the various taxes implemented on each stage of a supply chain.

Furthermore, it has been categorized into CGST, SGST, and IGST based on whether the transaction of goods and services is intra or inter-state.

  • Intra-state supply of goods and services – In case the supplier and point of sale are in the same state, sellers need to collect both Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST).
  • Inter-state supply of services and products – In case the location of manufacturing and sale are in different states, Integrated Goods and Services Tax or IGST is levied.

Here is how to calculate GST using an online calculator. This financial tool helps in convenient computing of taxation by all taxpayers and collectors.

Calculating Goods and Services Tax

Being a federal country, both State and Central governments are assigned with the power to collect and levy taxes on goods and services in India. This collected revenue enables them to perform their distinct responsibilities. However, considering that this unified taxation regime was launched with the motto of ‘One Nation, One Tax’, this location-based, transaction-dependent taxation structure (IGST, CGST, and SGST) helps taxpayers take a tax credit against each other.

However, the calculation of taxes for each of these remains the same and is calculated under slabs - 5%, 12%, 18%, and 28%. A GST Calculator can be used –

  1. To add the tax to the base amount

(Goods and Services Taxes X original cost of the goods and services) / 100

Net price of the product or the service = (Original cost of the product + tax amount).

  1. To deduct tax from the base amount

Original cost of product or service – [Original cost X {100 / (100 + Tax percentage)}]

Net price of the product or the service = Original price – Tax amount

In an attempt to simplify the calculation of this taxation system, the GST calculator for wholesalers and retailers was launched. Calculating taxes through this financial tool involves the following steps –

Step 1: Select tax inclusive/exclusive as per requirement

Step 2: Enter the original price of goods or service

Step 3: Select applicable tax slab from its drop-down menu list

Step 4: Click on ‘calculate’ link on the GST calculator to check the applicable tax.

Subsequently, the result will show the total tax amount and pre or post-tax amount of the goods in question.

A hassle-free calculation, reduced tax amount, and convenience to pay a single tax have led to an increased number of taxpayers benefitting from this taxation regime. Post the completion of its application process and verification, a GSTIN number is provided to applicants. This number can be used to track their tax payments, avail advances, etc.

Keeping this GSTIN number handy is paramount for several reasons. Thus, it is imperative to compute and calculate tax on your goods or services, considering that it helps one get a transparent idea about the expected net cost of the product.

This number can also be used to arrange for finances that would help bridge the monetary requirement of a company. Such advances are available through several financial institutions and NBFCs. Availing an unsecured business loan and utilizing the same to boost multiple aspects of a brand helps it generate higher revenues.

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