Understanding GST in India
The Goods and Services Tax (GST) is an indirect tax used in India on the supply of goods and services. It is a comprehensive, multi-stage, destination-based tax that has replaced many indirect taxes in India such as the excise duty, VAT, and services tax. GST is divided into five different tax slabs for collection of tax: 0%, 5%, 12%, 18% and 28%.
How to Calculate GST Online
Calculating GST manually can be prone to errors, especially when dealing with large invoices. Our GST Calculator automates this process. The calculation is straightforward:
- To Add GST to a Base Amount: GST Amount = (Original Cost x GST Rate%) / 100. Net Price = Original Cost + GST Amount.
- To Remove GST from an Inclusive Amount: GST Amount = Original Cost - [Original Cost x (100 / (100 + GST Rate%))]. Net Price = Original Cost - GST Amount.
For example, if you sell a service for ₹10,000 and the GST rate is 18%, the GST amount is ₹1,800. The total invoice amount you should bill your client is ₹11,800.
CGST, SGST, and IGST Explained
India uses a dual GST model, meaning both the Central and State governments administer it.
- CGST (Central GST): Collected by the Central Government on an intra-state sale (e.g., a transaction happening within Maharashtra).
- SGST (State GST): Collected by the State Government on an intra-state sale. If the total GST is 18%, it is split as 9% CGST and 9% SGST.
- IGST (Integrated GST): Collected by the Central Government for inter-state sales (e.g., Maharashtra to Gujarat). The full 18% is charged as IGST.
Common GST Rates for Businesses
While calculating, it helps to know which slab your business falls into:
- 5%: Household necessities, life-saving drugs, economy class flights.
- 12%: Computers, processed food, business class flights.
- 18%: Most services (IT, consulting, financial), capital goods, industrial intermediaries.
- 28%: Luxury items, automobiles, aerated drinks, tobacco.