How is GST calculated in India?

Shree , Last updated: 31 August 2023
Share

Are you stuck somewhere, confused by complicated laws? It is hard to keep things at your fingertips, especially when it comes to finances because there is so much external matter revolving around it. If you are thinking about GST and other taxes - you are at the right place. You can easily find the answer on how to calculate GST in our country. We will walk you through it, one step at a time - so do not worry. Firstly - let us start at the very beginning.

What is GST?

GST (Goods and Services Tax) is an indirect tax that has replaced various indirect taxes in India. On March 29, 2017, the Goods and Service Tax Act was passed by Parliament. The Goods and Services Tax Law in India, which went into effect on July 1, 2017, is a destination-based, multi-stage tax that is levied on every value addition.

GST (Goods and Service Tax) is a type of indirect tax applied to the provision of goods and services. Many of India's earlier indirect tax rules have been replaced by this law.

Well, you could also use an Indian GST calculator to know this instantly, but here we can find out how to get it done without the help of other tools, but also by yourself.

Now, you need to know that the government collects four types of GST. If you aren't aware of that - do not worry; we are here to explain.

CGST - Central
SGST - State
IGST - Paid to the Central for the States
UTGST - Union Territory

Without beating around the bush anymore - let us get straight to the point of calculations.

How to Calculate GST Yourself?

As a Buyer, you must be familiar with the Net Price of the good and the associated GST rate that applies to that good in order to compute the GST on your purchases (5 percent, 12 percent ..and so on).

Using the formula below, you can easily compute the GST:

The formula that is used when GST is excluded

GST = Supply Value*GST%/100

When the GST is included in the supply value

GST = Supply Value - [Supply Value x {100/(100+GST%)}]

Now that we know the calculation methods and the formula, it would only be right to know everything in depth.

How to Calculate GST - In Detail

Step 1: Finding the GST Rate

Finding the GST Rate for the Goods or Service under the GST Act is the first step in calculating GST. The GST Council has communicated GST rates for practically all commodities and services in India during the last month.

To determine the GST rate, one must first determine the type of supply provided, i.e., is it a good or service. If the supply is good, it's crucial to interpolate with the HSN Code that applies to it. The HSN Code is a global classification system for all types of items in international trade.

When a transaction involves the providing of a service, the concerned individual must verify the SAC Code to see if it refers to the service. Service Accounting Codes, or SAC Codes, are used to classify all services under GST.

Step 2: Determine Applicability

After determining the GST rate, the applicability of IGST, CGST, and SGST must be decided. Individuals should determine the location of supply to determine if IGST, CGST, or SGST are applicable. In most circumstances, the place of supply of goods or services is the address where the goods or services were delivered or provided. The assessment of the place of supply is particularly difficult in some types of transactions involving e-commerce or OIDAR services.

If IGST is applicable and the supply is interstate, the HSN or SAC code's total GST must be accounted for under IGST. If CGST and SGST are both applicable and the supply is intra-state, the GST for the HSN or SAC code must be split between the two. The IGST, CGST, or SGST calculation is only for the purpose of classifying the tax income and crediting it to the state of consumption. There would be no double-taxation because the GST tax rate would remain unchanged.

Step 3: Determine if GST is Chargeable on Reverse Chargeable

Normally, the supplier of the products or services is responsible for collecting tax from the recipient and remitting it to the government under GST. However, if the services provided to the user are notified as reverse charge services, the recipient will be held liable. As a result, both the user and the service provider should be aware of whether the transaction comprises GST reverse charge.

Step 4: Enroll Under GST Scheme

GST compliance typically necessitates the supplier to keep thorough accounting and records, as well as complete three GST filings every month. Many SMEs in India, on the other hand, would find GST compliance difficult and would demand a simpler approach. Businesses that have a turnover that is lesser than Rs.75 lakhs can join the GST Composition Scheme and pay a fixed rate of GST based on their whole revenue. Suppliers engaged in the GST composition scheme must present documentation proving that they have been identified as composition suppliers and are therefore not entitled to collect tax.

As a result, the user should check if the supplier has enrolled in the GST Composition Scheme before proceeding with the transaction.

Step 5: Type of Transaction

These transactions are of three types:

B2B
B2C - More than Rs. 2.5 lakhs
B2C - Less than Rs. 2.5 lakhs

The beneficiary of the products or services would not be eligible for an input tax credit in a B2C transaction under GST. In a B2C transaction, however, the recipient is not required to disclose information about his or her GSTIN or registration. If the transaction value exceeds Rs.2.5 lakhs, the recipient must provide information such as name, address, and other information to determine the location of the supply.