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The GST Calculator Formula: Why Do People Use It?

Be it a trader or a purchaser, everyone who buys or purchases anything needs to pay the Goods and Service Tax on the product. It is a tax that the Indian government has levied on buying and selling of any good. Our GST calculator formula helps these people to easily calculate the total price that they need to pay for a product.

What is GST?

Earlier, many indirect taxes were imposed on a good, for example, Excise, VAT, service tax, etc. Later, to replace these multiple indirect taxes levied on products, the Parliament approved the Goods and Services Tax Act on March 29, 2017. A comprehensive, multi-stage, destination-based tax is imposed on every value addition under the Act, which came into effect on July 1st, 2017. The Indian government has levied the tax on the makers, consumers, and sellers of goods across the entire country. GST is derived from Value Added Tax (VAT), which means that it is applied at each stage and that the consumer is responsible for paying the GST amount assessed by the final supplier or dealer in the supply chain.

Purpose of GST:

The following are the reasons the government wanted to impose GST:

To implement the idea of "One Nation, One Tax”:

The benefit of a single tax is that each state applies the same rate to a specific good or service. With the Central Government setting the rates and policies, the tax administration has become simpler.

To reduce the impact of the cascading effect of taxes:

In the past, taxpayers were unable to set off the tax credits from one tax against another due to disparate indirect tax laws. For instance, the VAT due during the sale could not be set off by the excise duties paid during manufacture, leading to a cascading effect of taxes. In the case of GST, the tax is only assessed on the net value added at each point in the supply chain. Thus, helping in eliminating the cascading effect of taxes.

To prevent tax evasion:

GST laws in India are far more stringent than any erstwhile indirect tax laws. Taxpayers may use only the invoices uploaded by their respective suppliers to claim an input tax credit under GST. So, there are few opportunities to use fake invoices to claim input tax credits.

Enhanced distribution and logistics:

Multiple pieces of documentation are no longer required for the supply of goods thanks to GST. Among its many advantages, GST reduces transportation cycle times, enhances supply chains and turnaround times, and promotes warehouse consolidation.

The GST system has improved transit and destination efficiency by removing interstate checkpoints. In the end, it assists in reducing the high costs associated with warehousing and logistics.

Which three categories of GST does the government collect?

At present, there are three different types of GST.

Central GST or CGST: The money goes to the Central Government and is applicable to sales within the state.

State GST or SGST: It applies to sales in a state and is directed toward the state government.

Integrated GST or IGST: It applies to purchases made outside of a state and is paid to the federal government. For instance, if you sell something within the state, CGST and SGST will each make up 50% of the GST. However, 100% of the IGST that is collected when you sell something outside of a state goes to the Central government.

Union Territory GST or UTGST: It is the tax collected by Union Territory Government.

Now that you know the basics of how GST operates, let's move on to understanding how GST functions in Tally, including its accounting and calculation.

What does a GST calculator do?

Based on a percentage-based GST (Goods and Services Tax) rate, the GST calculator assists you in determining the net or gross price of your product. It's easy to use; just enter values you already know (like the net price and the GST rate) to get other values back (like the gross price and the tax amount in this case).

Use the GST calculator to calculate GST in the following manner:

Taxpayers can learn about the various GST rates that apply to various categories under the new tax system. There are five specified rates for goods under the GST, and each one is listed under a schedule in the GST Rates Booklet for Goods. These are the percentages of 0%, 5%, 12%, 18%, and 28% that are required when calculating GST.

GST Calculation Formula:

This is how you calculate GST:

  1. Add GST:

    GST Amount = (Original Cost x GST%)/100

    Net Price = Original Cost + GST Amount

  2. Without GST:

    Total GST= Original Cost – [Original Cost x {100/(100+GST%)}]

    Total Price = Original Cost of the product – GST Amount.

How can you use our online GST calculator?

The following steps must be followed in order to calculate GST using the GST calculation formula:

Step 1:Decide whether you want a GST inclusive or GST exclusive based on your needs.

Step 2:Type in the starting amount.

Step 3:Choose the GST percent from the drop-down menu list.

Step 4:To calculate the amount, click Calculate. According to your initial request, the result will show the total GST amount as well as the Pre-GST/Post-GST amount.

GST inclusive amount: The total product values after deducting the applicable GST amount from the item's base price are referred to as the GST inclusive amount. The customer's bill does not include additional charges to cover the tax.

GST exclusive amount: After deducting the GST amount from the item's GST Inclusive value, the amount that remains is referred to as the GST Exclusive amount.

Benefits of using a GST Calculator:

  1. You have the option of calculating your tax liability.
  2. Due to its efficiency and accuracy, you can save a lot of time.
  3. As long as the GST is calculated correctly, you are still protected from any fraudulent activities.

With the help of our A2Z GST calculator, you can easily calculate the amount of GST that needs to be paid for a particular day, month, or even quarter online. It is one of the best tools available online and free to use.