What is Goods and Service Tax and How is it calculated?

Goods and Service Tax

Many People don’t know what is goods and service tax. Goods and Services Tax is a value-added indirect tax applicable across India. Goods and Services Tax popularly known as GST, is a system that has a ‘One Nation One Tax’ agenda and has successfully helped the Indian Government in achieving this agenda. With the implementation of GST many different indirect taxes, like service tax, excise duty, value-added tax, entry tax, luxury tax and much more came under one umbrella. This system replaced these taxes which helped in achieving uniformity in the taxes. 

GST reformed the indirect tax system in India, it has gone through multiple amendments and was implemented on 1st July 2017 finally, as the Goods and Services Tax Act. It replaced indirect taxes on goods and services but was not able to replace customs duty indirect tax which is mandatory and still applicable in India. GST is not the same for every product and service, different products and services have different GST rates. 

The regulatory body of the GST is CBIC, The Central Board of Indirect Taxes and Customs is governing this tax, tracking necessary changes and amendments regarding the GST. With the implementation of GST, the indirect taxation structure of India became more simple and successful. 

There are different slab rates for different type of Goods and services, tax payment varies for different categories of goods and services

  • Luxury and comfort goods come under the higher slab category.

  • Necessities are included in the category of lower and nil slab rates.

The aim of the distribution or classification of goods and services is to ensure uniformity of wealth distribution among residents of India. 

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List of taxes revoked by the GST 

The introduction of the GST revoked the indirect tax system and introduced a comprehensive indirect tax structure. This tax structure combined all indirect taxes and imposed all of these taxes under one umbrella. This tax structure helped in achieving uniformity in the collection process without any fraud. 

Mentioned below is the list of taxes revoked by the GST that were imposed by the central and state government

Central government taxes:

  • Central government had imposed a central sales tax. 

  • Service Tax was also lavished by the central government.

  • Central sales tax was prevailing inside the country.

  • Other Duties like Excise Duty, Countervailing Duty, Special Additional Customs Duties. 

State government taxes: 

  • State VAT was imposed by the state government.

  • Entry Tax and Octroi Duty was lavished by the state government.

  • Luxury Tax was type another tax.

  • Amusement and Entertainment Tax was also charged by the government.

  • Advertisements taxes were also prevailing. 

  • cess and surcharges taxes.

  • Purchasing tax was also imposed.

  • Betting, lottery and gambling taxes.

Read More : GST Registration process in India

GST Calculation 

For individuals who are running businesses, the GST calculation is of utmost importance for them. One who is an entrepreneur should know how GST is calculated. 

Two cases are involved in the calculation of the GST 

  • When you have to get the net price. 

  • Removing GST from the price that is inclusive of GST.

There are many different types of online GST Calculators and methods which are used to calculate GST cost. New tax structure helped in understanding the different GST rates that are applicable on the different types of goods and services. Different GST rates that are applied are 0%, 5%, 12%, 18% and 28% while calculating GST. 

GST percentage in India is based on the different types of goods and services, like in case of : 

  • Necessity items like milk, wheat or flour have 0% GST rate.

  • In case of tough diamonds, the GST rate is 0.25%.

  • In case of items like gold, silver etc, the GST rate is 3%.

  • Most Services fall under the 18% GST category. 

  • Most goods fall under the 5%, 12% and 18% GST categories.

  • In case of items like cement, car, or tobacco, the GST rate is 28%. 

  • Cess is applicable on a handful of goods like pan masala. 

  • At some places GST is applicable at NIL rate.

Read More : How to Download GST Registration Certificate ?

Four different tax heads under GST are as under: 

  • State Goods and Services Tax or (SGST) this type of tax is collected by the State Government.

  • Central Goods and Services Tax or (CGST) this type of tax is collected by the Central Government.

  • Union Territory Goods and Services Tax or (UTGST) this type of tax is collected by the government of the Union Territory.

  • Integrated Goods and Services Tax or (IGST) this type of tax is collected for inter-state transactions and imports by the Central Government. 

GST calculator is a tool that helps in the calculation of GST amount on different types of goods and services. It also helps in understanding the amount of GST that is included in the price of the product. If you want to use a GST calculator, you need to know the Price to calculate, Total amount and Tax slab.

  • Price to calculate: You need to know what type of price you need to calculate, whether to calculate GST from GST exclusive price or from GST inclusive price.

  • Total amount: inclusive or exclusive price of the product.

  • Tax slab: tax slab of different types of categories under which the products fall. 

On the basis of above mentioned price calculation, GST calculator will show you results of  Total GST Amount and Pre/post GST Amount. 

The online calculator uses a formula on its own, it applies an automatic applicable formula, so you need not to worry about any formula procedure. It gives accurate results, you can use any online website calculator in order to calculate the GST. 

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GST percentage Calculation formula

Formula for adding GST to the base amount

  • GST Amount is equal to the original value of GST% by 100. 

GST Amount = ( Original value * GST% ) / 100

  • Net Amount equal to the original value plus GST amount.

Net Amount = Original value + GST Amount.

Formula for removing GST to the base amount

  • GST amount is equal to the original value minus Original value multiply by 100 / (100 + GST%) 
  • Net price is equal to the original value minus GST amount ” or”

Net Price = Original value – GST Amount

Read More : What is the Trademark law in India?

Benefits of GST Calculator

There are many different types of benefits that an entrepreneur can get after using GST Calculator, few of them are mentioned below:

  • It helps in differentiating SGST, CGST and IGST and accurate calculation of these types.

  • It acts as a time saver and saves time by providing quick results.

  • It minimises the human risk error at the time of Calculation.

  • The GST calculator is very easy and helps in the calculation rate of products and services in a very simple manner.

  • It helps in determining the product price both net or gross.
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Conclusion

The goods and services tax has changed the whole tax system in India. With the implementation of GST the amount system also witnessed a drastic change. Entrepreneurs has seen cost reduction in the interstate or intrastate sales. With the presence of the GST system, GST calculation became important and is benefiting the enterprise.

FAQ’s

Who is the regulatory body of the GST? 

What kind of taxes were revoked by the GST? 

What is important for the GST calculator? 

What kind of GST rates are applied on goods and services during calculation? 

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