How to Calculate GST on Goods? – A Complete Insight for Easy Business

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Published Date:  06-01-2024   Author:   pratis-amin
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Introduction

Indian entrepreneurs, irrespective of their type of business, have compulsion to pay GST on goods they supply to their customers. From products to goods used for different purposes, GST is applied on items that fall under its slab. However, there is a certain method to pay GST which the entrepreneur needs to have a complete idea and should be done without any error. Having an insight knowledge about GST calculation on goods can help you pay the tax and contribute towards nation’s growth.

With the implementation of a unified tax system and an understanding of GST calculation for goods online, taxpayers can now be aware of the tax levied at different locations for different goods and services. To pay the GST for the service offered, you need to be aware of the rates applied as per the category. It further helps in calculating the GST.

What is GST?

GST (Goods and Service Tax) is an indirect tax levied on goods and services in India. Any added value in the respective product or goods is subject to a full, multi-stage, destination-based GST tax. There are five different tax rates applied to products and services under the GST: 0%, 5%, 12%, 18%, and 28%. The reason to implement GST is to eliminate several indirect taxes and streamline the tax code, improving its efficiency and transparency throughout the tax regime.

All businesses that operate in India need to register for GST. However, it also depends on the size and overall profit volume it holds yearly/monthly. If a business deals with products having a turnover of Rs 40lac and goods with the turnover of Rs 20lac yearly must possess a GSTIN or GST Identification Number. This tax is imposed on consumers for all goods and services they purchase. It is, therefore, crucial that one knows how to compute GST correctly. GST calculator for goods can assist you in assessing the same.

Also Read: GST: Everything You Need To Know

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Different Types of GST –

There are four different types of GST-

  1. CGST – The intrastate supply of goods and services is subject to the Central Goods and Services Tax, or CGST.
  1. SGST – Like the CGST, the state goods and services tax, or SGST, is levied on sales of goods and services within a state.
  1. IGST: The integrated goods and services tax, or IGST, is levied on goods and services that are transferred between states.
  1. UTGST: Union Territories, including the Andaman and Nicobar Islands, Dadra and Nagar Haveli, Daman and Diu, Lakshadweep and Chandigarh, have Union Territory Goods and Services Tax (UTGST) imposed on the sale of goods and services. UTGST is imposed in addition to CGST.

What is the GST Calculator and its Importance?

Just like other calculators for assessing finance, the GST calculator helps in calculating the overall tax payment for the month to the government. Whether you are a wholesaler or manufacturer, calculating GST is important. You need to use the GST formula for goods, which you can calculate and pay accordingly.

Precise GST calculation is essential for companies to adhere to tax regulations, establish product costs, and obtain Input Tax Credit (ITC).

Also Read: GST Calculator Online – Simplify Your Daily Finances And Taxes

How GST Works?

Before you go ahead to learn about GST calculations for goods on sale, it is important to know how they work.

  • Manufacturer: The manufacturer is responsible for paying GST on the value added to the product during production as well as on the purchased raw materials.
  • Service Provider: In this scenario, the service provider oversees paying GST on the purchase price of the product as well as any value additions made to it.
  • Nonetheless, the amount of GST that must be paid can be reduced by the manufacturer’s tax payment.
  • Retailer: The retailer is responsible for paying for both the margin they contributed and the goods they purchased from the distributor. Nonetheless, the total GST that needs to be paid may be reduced by the retailer’s tax payment.
  • Customer: Purchased goods are subject to GST payment, which is added in the final price.

How is GST Calculation on Goods Done?

GST calculation for goods on sale is done using a formula that makes it easy to get the result. To calculate GST, you need to know which products or services fall under the categories. Once you are aware, you can use the GST formula for goods to get the right result. Below is a simple method to explain GST calculation-

Imagine a product or service is sold at the rate of Rs. 1,000, and it falls under 18% GST; the net price calculated will be = 1,000+ (1,000X(18/100)) = 1,000+180 = Rs. 1,180. So, the customer must pay Rs 1,180/-.

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Similarly, to remove the GST from the product is-

GST Amount = Original Cost – (Original Cost * (100 / (100 + GST%)

Net Price = Original Cost – GST Amount

How to Use Online GST Calculation Tool?

Different finance sites offer GST calculators for goods which helps in making the calculation easy. You can use the tool to get a better idea. Below are the steps to use the GST calculation tool-

Step 1: Select GST amount( inclusive/exclusive) as per the requirement.

Step 2: Enter the original amount.

Step 3: Select the GST rate.

Step 4: Click on Calculate. You will get complete result about the total GST amount and Pre-GST/Post-GST amount as per your original requirement.

Also Read: Smart Tax Management: Calculate GST Online And Save Your Time

Calculating Tax for Inter-State Sales

The Central Government imposes Integrated GST (IGST) on products and services supplied between states. In the event of an interstate transaction, the importing state will get the IGST.

When goods were moved between two states under the previous tax structure, CST was levied in addition to VAT and excise taxes. The sole tax imposed under the GST system on products travelling across state boundaries is the IGST. Here’s an illustration to help you comprehend the IGST system:

Manufacturer Value Old Tax System GST System
Cost of goods Rs 1,00,000 Rs 1,00,000
VAT of 12.5% 12,500
IGST of 12% Rs12,000
CST 2% Rs 2,250
Total Value Rs.1,14,500 Rs.1,12,000

What is the Impact of GST on products?

The indirect tax levied by the Central and State Governments is called Central GST (CGST) and State GST (SGST). The seller will impose taxes on the buyer in intrastate transactions, such as CGST and SGST, and should be paid to the state and central governments. An illustration of this kind of GST is shown below, illustrating how it affects goods prices:

Old Tax System GST System
Product price got sold from Nagpur to Hyderabad = Rs.1,000 Price of a product sold from Nagpur to Hyderabad = Rs.1,000
VAT @ 10% = Rs.100 CGST @ 5% = Rs.50 + SGST @ 5% = Rs.50
Cost of the product sold from Nagpur to Hyderabad = Rs.1,100 Product sold from Nagpur to Hyderabad = Rs.1,100
Profit Rs 1000 Profit Rs 1000
Selling Price Rs 2100 Selling Price Rs 2100
CST @ 10% = Rs.210 IGST @ 10% = Rs.110
Total cost = Rs.2,310 Total cost  = Rs.2,210

Also Read: Impact of GST: Invoice, Simplified Tax System and Reduce Compliance Burden

Benefits of GST

The government, when implementing GST on products and goods, was clear that it wanted to change the tax structure in India, especially for businesspeople. There were multiple taxes, which were brought into one name, GST. Some of the advantages are-

  • The new tax regime helps to maintain the worldwide standard tax system. Additionally, it facilitates open communication between the producer and the customer.
  • Eliminating double taxes on business goods is the primary goal of the GST implementation. It further encourages increasing competition in providing quality products and services to customers and contributing towards the nation’s GDP.
  • Tax reductions lower manufacturers’ manufacturing costs, which in turn boosts exporters’ competitiveness.
  • It is anticipated that market inflation, which is the most important concern, will decline after the GST is implemented.
  • There is also a belief that the tax liability will decline. A price decrease is anticipated since input tax can be offset by output tax.

Conclusion

GST is certainly an important part of the tax regime in India, and having a clear idea about GST calculation for goods on sale can help businesses follow tax rules. Initially, it may be confusing to calculate, but with online calculation tools available, things are easy. You can do the GST calculation for goods online and manage your business accordingly.

FAQs

1) What is the GST Inclusive Amount?

Ans: GST inclusive amount is the whole value of the commodity or service that has a GST price included in its initial value. Since the customer is not being charged a separate tax in this situation, the sum is referred to as GST included.

2) What is the GST Exclusive Amount?

Ans: GST Exclusive amount is the price of goods/products which don’t have the GST amount.

3) What is the example of IGST?

Ans: IGST is applied to commodities transported from one city to another. For instance, traders in Mumbai will pay the IGST, and traders in Gujarat will gather it and provide it to the government if the 5% tax is applicable. Therefore, in this case, the state and the central government split the tax revenue.

4) What is the formula to calculate GST?

Ans: When GST is included in the product:

GST Amount = (Value of supply x GST%)/100

Price = Value of supply + GST Amount

When GST is included in the supply:

GST Amount = Value of supply – [Value of supply x {100/(100+GST%)

5) What is the total limit imposed on GST?

Ans: The Central Government has set the threshold limits for GST registration for commodity providers at Rs. 20 lakh and Rs. 40 lakhs. However, since the GST also determines each State’s revenue, the State governments need to decide the GST limit.

6) What benefit can I get with a GST calculator?

Ans: GST calculator for goods helps the user to know that the calculation is perfect and is done within a quick session.

7) Can I use a GST calculator for multiple GST rates?

Ans: Yes, by entering the rate levied on each good or service during the transaction, you can use the GST calculator to check different GST rates.

8) How can I calculate GST on advance payments?

Ans: The rate that will apply to future supplies of goods or services is used to compute the GST on advance payments. The provider must provide a receipt voucher with complete details of the GST applied to the advance payment.

9) How to calculate GST on discounted prices?

Ans: In this scenario, you need to calculate GST on the final price of the product. Therefore, the discounted selling price should be utilized to apply the applicable GST rate for calculating GST on discounted pricing.

10) Can I get an online GST calculator?

Ans: Yes, there are online websites where you can find a GST calculator that helps you to calculate and conduct your business peacefully.

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Pratis Amin

Pratish is a seasoned financial writer with a profound understanding of the financial world. With years of experience in content development, especially in finance and IT, and being a commerce graduate, he offers valuable insights to help readers navigate the complex landscape of money management, GST and financial planning. With simple reading content, but with great information, Pratish keeps himself updated with the finance industry. In spare time, he loves binge watching series and socializing.

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