Implementation of GST has affected various aspects of a business operation ranging from product pricing to tax compliance. This is where the online GST calculator comes in handy. The cost of goods and services can be calculated using an online GST calculator that is available on many third-party websites.
GST Tax Calculation Formula
All one needs to do is input the net amount of a good or service and the applicable GST rate (5%, 12%, 18% or 28%) into the tool. Click on the ‘Calculate’ button and instantly get the gross price of the good or service. GST calculation is represented by the below example:
A goods or service is sold at the rate of Rs.500. GST rate is 18%. Gross amount of the goods or service = 500 + [500 x (18/100)] = Rs.590
Formula for GST calculation:
-
- Add GST:
GST Amount = (Original Cost x GST%)/100
Net Price = Original Cost + GST Amount
-
- Remove GST:
GST Amount = Original Cost – [Original Cost x {100/(100+GST%)}]
Net Price = Original Cost – GST Amount
Impact of GST on Product Pricing
Indirect tax will be levied by Central and State Government called Central GST (CGST) and State GST (SGST), respectively. In the case of intra-state transactions, the seller will collect CGST and SGST from the buyer which will be paid to the Central and State Government, respectively. Listed below is an example of the impact of GST on product pricing:
| Old Tax System | GST System |
|---|---|
| Price of a product sold from Pune to Jaipur = Rs.1,000 | Price of a product sold from Pune to Jaipur = Rs.1,000 |
| VAT @ 10% = Rs.100 | CGST @ 5% = Rs.50 + SGST @ 5% = Rs.50 |
| Cost of a product sold from Pune to Jaipur = Rs.1,100 | Cost of a product sold from Pune to Jaipur = Rs.1,100 |
| Profit = Rs.1,000 | Profit = Rs.1,000 |
| Selling Price = Rs.2,100 | Selling Price = Rs.2,100 |
| CST @ 10% = Rs.210 | IGST @ 10% = Rs.110 |
| Total cost of the product = Rs.2,310 | Total cost of the product = Rs.2,210 |
Benefits of using GST Calculator
While implementation of GST will ensure a transparent manner of collecting revenue and improve tax compliance, GST calculator will save time and give instant results. There is low to zero chances of human error when using an online GST calculator to compute the total cost of a good or service. The tool also gives the user an option to either add or remove GST rate from the net price of the product.
General Benefits of implementing GST in India
Implementing a single indirect tax is beneficial in many ways such as:
- It not only helps in setting an international standard but also ensures transparency throughout the tax structure right from the manufacturer to the consumer.
- The primary objective of implementing GST is to prevent double taxation of commercial goods. GST is expected to ultimately increase competition among the manufacturers and sellers to provide high-quality goods which in turn will boost the GDP of the country.
- The reduce in tax will bring down the production cost for companies. Thus, increase the competition among exporters.
- Inflation is expected to decrease after the implementation of GST.
- It is also said that there will be a decrease in tax liability. Reduction in price is expected as input tax credit is available against output tax. Following taxes will be set-off with the same or with the different tax input credits