- What is GST?
- Types of levies in GST
- What is the formula used by a GST Calculator?
- GST Calculation - How is it different from erstwhile taxation laws?
What is GST?
GST or Goods and Services Tax is an indirect tax that has been levied on the supply of goods and services that is on every value addition. Today, every business is using one or the other GST calculator in order to be compliant.
Goods and Service Tax is known to be multi-stage tax because the tax is levied on every stage that comes in between from manufacturing to final sale to the consumer. It is levied where goods and services are consumed, and therefore, it is also to be known as destination-based tax. Thus, it is extremely important to know how to calculate GST and use the right GST tax calculator.
Types of levies in GST
There are currently three types of GST. They are CGST, SGST/UTGST, IGST. A GST Calculator should account for the same as follows -
- Central GST (CGST) and State GST (SGST) are levied on the supply made by a registered person within the state.
- UTGST will be levied along with CGST on supply made by a registered person within a union territory.
- IGST will be levied on the import or interstate supply of goods or services or both. Thus a GST calculator should calculate Integrated GST as the sum total of CGST and SGST/UTGST.
What is the formula used by a GST Calculator?
Before knowing the formula, it is first required for us to understand the two terms related to GST calculation, which is used by a GST calculator software.
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Taxable Value |
GST will be levied on the value of supply i.e., to levy GST, the correct value of supply is required. Taxable Value of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services where the person making supplies and the recipient of the supply are not related and the price is the sole consideration for the supply. |
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Invoice Value |
Understanding the term taxable value with respect to GST returns, which states that the taxable value is the value on which GST shall be computed and thus a GST calculator should calculate Invoice Value as = Taxable value + GST |
Thus, the formula to be used by a GST Calculator is:
GST Amount = Product of the Actual Cost of an Item X Percentage of GST Rate Imposed for the Goods or Services.
Therefore, this is how to calculate GST in India and account for it in an invoice:
Invoice Value = Taxable Value (+) GST Amount
GST Calculation - How is it different from erstwhile taxation laws?
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Erstwhile Taxation laws |
GST Taxation system |
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First Transaction Product sold from Erode to Madurai: (Intra – State Sale) Price - Rs. 1000/- VAT at 10% - Rs. 100/- |
First Transaction Product sold from Erode to Madurai: (Intra – State Sale) Price - Rs. 1000/- As per GST calculator, CGST@ 5 % (GST rate) – Rs. 50/- (1000*5%) SGST@ 5 % (GST rate) - Rs. 50/- (1000*5%) |
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Second Transaction : - Product Sold from Madurai to Bangalore Cost - Rs. 1100/- Profit (Value addition) - Rs. 1000/- Selling Price (taxable value) - Rs. 2100/- CST at 10% - Rs. 210/- Invoice Value is - Rs. 2310/- Note : - CST of Rs. 210/- paid is not available for credit unless until you have CST sales to set off it. (CENVAT Credit restriction) |
Second Transaction : - Product Sold from Madurai to Bangalore (interstate sales) Cost - Rs. 1100/- Profit (Value addition) - Rs. 1000/- Selling Price (taxable value) - Rs. 2100/- As per GST calculator, IGST@ 10% - (2100*10%) Rs. 210/- Invoice Value is - Rs. 2310/- As per GST calculator, Net Liability after set-off ITC = 210 – ( 50 * (CGST) ) – ( 50 * (SGST) ) = 110/- As GST unifies the state boundaries and thereby make the ITC available for set-off against GST output tax liability. |
