GST - Simplified tax model for unified taxation

Government of India introduced Goods & Service Tax (GST) with effect from 1st July 2017 under the theory of "One Nation, One tax" to achieve the principal objective of eliminating the cascading effect of taxes. Various indirect taxes happening at multiple stages of the supply chain like the Value Added Tax (VAT), Service Tax, Central Sales tax (CST), Excise Duty, Octroi were subsumed into one as GST.

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What is GST?

Goods & Service Tax (GST), as the name indicates, is a levy of tax on the supply of goods or services. It comes within the indirect tax category, as it is generally collected from the buyer/recipient of goods/services by the seller/provider of the same.

GST follows the Value-Added or Input-tax-credit system wherein the GST paid on inward supplies is adjusted against the GST collected on outward supplies to arrive at the net GST payable to the Government monthly. Outward supplies means revenues earned from the sale of goods or providing of services and Inward supplies means the cost incurred to earn the revenue on account of the purchase of goods or receipt of services

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What are the types of GST?

The government collects GST in four forms based on the incidence of taxation, also called the Place of supply or Destination based taxation system.

Central GST (CGST) - Central Government's 50% share of GST is charged on Intra-state or Intra-UT transactions that is sale transaction within the same state or the same Union Territory.

State GST (SGST) - State Government's 50% share of GST is charged on Intra-state transactions, that is, sale transactions within the same state.

Union Territory GST (UTGST) - Union Territory Government's 50% share of GST charged on Intra-UT transactions that is sale transaction within the same Union Territory. As per the recent GST council pronouncements, the following 5 regions are considered as Union Territories under the purview of GST

  • Chandigarh (GST POS code - 04)
  • Dadra & Nagar Haveli and Daman & Diu (GST POS code - 26)
  • Lakshadweep (GST POS code - 31)
  • Andaman and Nicobar (GST POS code - 35)
  • Ladakh (GST POS code - 38)

Integrated GST (IGST) - Central Government charges IGST on Inter-State, Inter-UT, import, and export transactions that are sale transactions across states and/or union territories or across countries.

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Businesses liable to pay GST

Any business whose turnover exceeds INR 40 lacs in a financial year is liable to get himself registered under the GST laws, collect-cum-remit the taxes and file the necessary GST returns prescribed from time to time. This 40 lac limit is, however, for a supplier of goods and for a service provider, the said limit is 20 lacs.

There are also some special category states like Arunachal Pradesh, Assam, Jammu & Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand, wherein the said limit is 20 lacs and 10 lacs for supplier of goods and service provider respectively. There is also a Composition scheme providing concessional rate of GST for businesses having turnover not exceeding 1.5 crores in a financial year on satisfaction of specific conditions.

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GST rates in India

The GST council of India has broadly categorized all goods & services into five tax slabs, namely 3%, 5%,12%,18% and 28%. In addition, there is a 0% rate (Nil-rated supplies) for essential goods like salt, jaggery, and cereals. Some of the items are exempt under the GST law (Exempt supplies) like fruits & vegetables and some of the items do not come within the purview of GST (Non-GST supplies) like petrol/diesel and alcohol.

Exports and Special Economic Zone (SEZ) supplies are treated as Zero rated supplies. Also, for some items like tobacco, cigarettes, and pan masala, an additional levy called GST compensation cess is charged besides the GST regular charge.

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How is GST calculated in the Retail Industry?

GST calculation

To calculate GST, one must know the

Value of the product/service

Determine the value of the product/service

A retailer has to first ascertain the selling price of the supply according to the valuation rules under GST law

GST rate applicable for it

Identify the GST rate applicable for that product/service

All goods and services are commonly categorized under a unified tax system using a Harmonized System Nomenclature (HSN) code or a Servicing Accounting Code (SAC) for goods or services, respectively. The GST Tariff table specifies the GST rate for each HSN/SAC code.

The retailer has to ascertain the HSN/SAC under which product/service supply has to be classified. Once that is finalized, then its corresponding GST rate can be easily identified.

Transaction type

Decide the transaction type based on the Source & destination places

Identify the from state and to state between which product/service is supplied. If both states are the same, then the transaction becomes an Intra-state supply and if they are different, then the transaction becomes an Inter-state supply. CGST & SGST would apply to Intra-state supply and IGST would apply to Inter-state supply. Hence determining the type of supply (inter-state or Intra-state) would help in deciding the type of GST(s) that would be applicable to the particular transaction.

Method of calculation

Select the calculation method

Select whether GST is to be calculated on the Inclusive method or Exclusive method. According to the method of GST, the calculation formula will vary.

GST calculation

What is GST Inclusive amount?

Inclusive method means the price determined includes the GST amount also, such that the final net price to the customer is fixed and the base value or taxable value on GST calculation has to be made. Base value or taxable value is arrived based on the reverse/back working method.

What is GST Exclusive amount?

Exclusive method means the base value or taxable value of the supply is first determined which does not include the GST amount in it. GST is calculated on this base value or taxable value and the final net price is arrived at by adding the GST amount to the base value or taxable value.

GST calculation formula under Exclusive method

In the Exclusive method, GST calculation formula is as follows: GST amount=     Value of the supply x GST rate / 100 Net price=     Value of the supply + GST amount The Value of the supply is also called the base value or taxable value or assessable value

For Example :

If Value of supply is ₹ 1000 and GST rate is 5%, then GST amount=     1000 x 5 / 100 = ₹ 50 Net price=     1000 + 50 = ₹ 1050

GST calculation formula under Inclusive method

In the Exclusive method, GST calculation formula is as follows: GST amount=     Net price x GST rate / (100+GST rate) Value of the supply=     Net price - GST amount The Value of the supply is also called the base value or taxable value or assessable value
Net price is the GST Inclusive price fixed for the product or service

For Example :

If Net price is ₹ 1000 and GST rate is 5%, then GST amount=     1000 x 5 / (100+5) = 1000 x 5/105 = ₹ 47.62 Value of the supply=     1000 - 47.62 = ₹ 952.38
Conversely, to prove the above values in Exclusive method GST amount952.38 x 5 / 100 = ₹ 47.62 Net price952.38 + 47.62 = ₹ 1000

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How to calculate CGST, SGST, UTGST?

As explained above on types of GST, CGST and SGST would apply to Intra-state transactions with equal share to Central and State governments. In the case of Intra-UT transactions, CGST and UTGST would apply with equal share to Central and UT governments. CGST rate=     GST rate / 2 SGST or UTGST rate=     GST rate / 2
CGST amount=     Value of the supply x CGST rate / 100 SGST or UTGST amount=     Value of the supply x SGST or UTGST rate / 100
Net price=     Value of the supply + CGST amount + SGST or UTGST amount

Example-1 :

If Value of supply is ₹ 1000, GST rate is 5% and a transaction happens within the state of Maharashtra, then CGST rate=     5% / 2 = 2.5% SGST rate=     5% / 2 = 2.5% CGST amount=     1000 x 2.5 / 100 = ₹ 25 SGST amount=     1000 x 2.5 / 100 = ₹ 25 Net price=     1000 + 25 + 25 = ₹ 1050

Example-2 :

If the above sale transaction happens within the UT of Chandigarh, then CGST rate=     5% / 2 = 2.5% SGST rate=     5% / 2 = 2.5% CGST amount=     1000 x 2.5 / 100 = ₹ 25 SGST amount=     1000 x 2.5 / 100 = ₹ 25 Net price=     1000 + 25 + 25 = ₹ 1050

How to calculate IGST?

In the case of Inter-State or Inter-UT, IGST would apply at the applicable GST rate IGST rate=     GST rate IGST amount=     Value of the supply x IGST rate/ 100 Net price=     Value of the supply + IGST amount

Example :

If the value of supply is ₹ 1000, GST rate is 5% and transactions happening between

  • A. Maharashtra & Gujarat (a State vs another State)
  • B. Chandigarh & Ladakh (an UT vs another UT)
  • C. Gujarat & Chandigarh (a State vs a UT)

then IGST would apply in all above scenarios, with IGST rate = 5% GST amount=     1000 x 5 / 100 = ₹ 50 Net price=     1000 + 50 = ₹ 1050

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Why is Gofrugal the best GST software?

Gofrugal's GST software helps you to operate your business efficiently with minimal staff and the least skills.

  • Gofrugal POS takes care of the tedious GST calculations and assures 100% accuracy in business data and reliability to run a business remotely.
  • E-invoices and E-way bills can be generated in real-time from the POS sale invoices automatically.
  • Integrated accounting ensures automatic GST accounting ledger posting for both purchase and sale invoices, to eliminate the duplication of efforts completely.
  • Tax filing application (TFA) provides ready-to-upload files for GSTR-1, GSTR-2, GSTR-3B, and GSTR-9 filing in desired formats like JSON/Excel/CSV.
  • TFA also provides automatic reconciliation of Input Tax Credit (ITC) among GST books, GSTR-2A and GSTR-2B.
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Frequently asked question

1. What is a GST calculator?

GST calculator is a simple tool to ease GST payable calculation on the value of products/services. The purpose of GST calculator is to automate the GST calculation under the various combinations of GST methods/types/rates for a given value.

2. How to use the GST calculator?

Gofrugal GST calculator requires four inputs to perform the GST calculations -

  • Value - Enter the value on which GST is to be calculated
  • Rate (%) - Select the applicable GST rate to be calculated
  • Rate Type - Choose the method of GST calculation - Inclusive or exclusive
  • Transaction Type - Pick up the product movement type - Inter or Intra State
After all the inputs are provided, the GST amount and its breakup will be automatically calculated by the GST calculator tool.

3. Who can use the GST calculator?

GST calculator can be used by any retailer, wholesaler/distributor, manufacturer, buyer, consumer, service provider, service receiver belonging to any trade, business, service or commerce

4. Advantages of GST calculator?

GST calculator simplifies the GST calculations such that it eliminates the manual effort, thereby producing error-free calculations. Users can play around with the GST calculator tool with multiple combinations of GST rates, types or methods for any given value of the transaction. Pre-tax, GST tax breakups and post-tax values can be calculated in one shot and viewed in one glance.

5. What is Assessable value in GST?

Assessable value, also called the Base value or Taxable value, is the value on which GST rate is applied to calculate the GST amount.

6. What is Reverse-charge mechanism under GST?

Normally under the GST mechanism (forward charge), it Is the liability cast on the seller to collect the GST from the buyer and remit it back to the Government. However, under Reverse-charge, for specified transactions or services, the GST liability is shifted to the buyer or the service receiver (for example, transportation services), who has to pay GST out of his own pocket without the seller charging GST on the invoice/bill