Determining GST: A Practical Guide
Understanding the calculation of the Goods and Services Tax (GST) is essential for accurate tax planning. Essentially, the GST can be computed by multiplying the taxable amount with the specified GST rate. In scenarios where Central GST (CGST) and State GST (SGST) or Union Territory GST (UTGST) apply, both CGST and SGST aare each half of the total GST.
General Formula for GST Calculation
GST = Taxable Amount x GST Rate
For cases where the total amount already contains the GST, the GST exclusive amount can be ascertained using the following formula:
GST exclusive amount = GST inclusive amount / (1 + GST rate/100)
For instance, if the GST inclusive amount is Rs. 525 and the GST rate is 5%, the GST exclusive amount will be Rs. 500, calculated as 525 / (1 + 5/100) = 525 / 1.05.
Understanding GST Rates in India
GST rates vary based on the category of goods and services. Here’s a brief overview:
– 0% GST is imposed on necessities like milk and wheat flour.
– Rough diamonds are taxed at 0.25%.
– Precious items like gold and silver carry a 3% GST.
– A GST of 5%, 12%, and 18% is applied to various goods, with most goods falling under the 5%, 12%, and 18% categories.
– Most services are taxed at an 18% GST rate.
– Certain items like cement, cars, and tobacco have a 28% GST.
– There’s also a Cess, applicable only on a few goods like cars, tobacco, and pan masala.
– There exist some goods/services with a NIL GST rate or that are exempt from GST.
Calculating GST in Reverse Charge Situations
Even in reverse charge situations, the calculation remains unchanged. Suppose you’ve purchased goods worth Rs. 10,000, and the GST on reverse charge at 18% applies. In such a case, the payable GST would amount to Rs. 1800 (10,000 x 18%). When CGST & SGST apply, an amount of Rs. 900 each would be paid for both.