The Goods and Services Tax or GST first came into effect in 2017 and has since simplified taxation in the country. This indirect tax based on VAT is levied on the supply of both services and goods and has replaced numerous other indirect taxes previously applicable. The introduction and implementation of GST also eliminated the cascading effect of taxes. Now, businesses and consumers pay a uniform rate, and the digitised processes are much simpler. In fact, you can use a GST calculator online to accurately know the tax amount levied within seconds.
However, to truly see the advantage of GST, you should have an idea of its components and how it is calculated. To that end, and to know about the different forms of GST collected at varying rates, read on.
Components of GST
GST is charged in every instance of value addition. As such, this multi-stage tax applies to every point of sale and is split into 4 main classifications or types in India. These are:
- State Goods and Service Tax or SGST
- Central Goods and Service Tax or CGST
- Integrated Goods and Service Tax or IGST
- Union Territory Goods and Service Tax or UGST
Each of these classifications has their own modality of application, and here is a table to offer insights on the same.
| IGST | This type of GST applies to interstate transactions |
| CGST | This type of GST applies to transactions that are done within a state or at an interstate level |
| SGST | This type of GST applies to transactions that are done within state boundaries |
To simplify this further, any transaction that qualifies for VAT taxation will be taxed under CGST and SGST. Revenue is shared equally by the state and the centre for such transactions. However, for interstate transactions, IGST applies and this amount is collected by the centre, after which it is shared with the state based on the destination.
Besides these components, it is important to note that there are varying tax rates slabs for GST. Each of these slabs have a list of goods and services under its purview, and is constantly under review. Currently, the GST tax slabs are 0%, 5%, 12%, 18%, and 28%. Almost all goods and services fall under one of these tax slabs, but there are a few exceptions. These are:
- Alcohol for human consumption
- Petroleum products
- Motor spirit
- High-speed diesel
- Aviation turbine fuel
- Natural gas
These aren’t taxed under GST but are taxed by their respective state governments of the states in which their sales occur.
Formula to calculate GST
As a taxpayer, you should know the GST tax slab applicable on the sale. With this information, you can use either of the following formulae to calculate GST.
To add GST to the base amount:
GST Amount = ( Original Cost * GST% ) / 100
Once you have this value, add it to the original cost and you will arrive at the net cost, including GST.
To subtract GST from the amount:
GST Amount = Original Cost – (Original Cost * (100 / (100 + GST% ) )
With this value for the GST amount, simply subtract it from the original cost and you will arrive at the amount, excluding GST.
Guide to calculating GST
Knowing to calculate GST is important for any business, regardless of whether it offers goods or services. Here is a quick guide to help you understand the process.
- Identify the GST rate applicable for the goods or services:
The revised rates set by the GST council are consistently published and are applicable to almost all sectors of business. Find either the HSN or SAC code attached to the supply. Based on this code, you will find the applicable GST tax slab. - Determine which type of GST is applicable:
The next step is to consider the place of supply and determine whether IGST, CGST, or SGST needs to be accounted for. In cases of inter-state supply, IGST is levied on the transaction. If there is an intra-state supply, CGST and SGST will apply. - Calculate the tax amount:
If IGST is applicable, the entire GST tax slab attached to the HSN or SAC code should apply as tax for the transaction. On the other hand, if CGST and SGST apply, then the tax slab rate must be equally divided amongst the two GST types.
Steps to use a GST calculator online
There are various free online tools that you can access, and most have a similar process. To use a GST calculator online, all you have to do is:
- Choose to have GST included or excluded in the final result
- Input the original amount
- Pick the applicable GST slab rate
- Click on ‘Calculate’ or any other option that helps complete the process
Within seconds, you should see an accurate result. In some cases, the calculator may even provide you with the net cost.
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