How to calculate GST?

How to calculate GST

How to calculate GST: GST: Goods and Service Tax and things you should be concerned about Goods and Service Tax (GST). GST is a tax based on the destination of the goods and services and who is the last consumer of those goods and services. It is the main Value Added Tax which will be implemented right from the stage of manufacturing to the final produced result. It will eliminate the cascade of taxes and thus result in a system where the final payer bears all the taxes. It has two different and equal components: Central and State GST. So, it is important for us to know How to calculate GST. The complete share of taxes will be paid by the final and home customer to the goods or services.

Read MoreWhat is GST?

How to calculate GST?

How to calculate GST
How to calculate GST

Taxes to be subsumed under GST: This is a very important point to note while one wants to understand how to calculate GST. The taxes listed below would be replaced by GST:

  • Taxes collected and levied by the Centres:
  1. Central Excise Duty
  2. Duties of Excise (Toilet and Medicinal Preparations)
  3. Additional Duties of Excise (Textiles and Textile products)
  4. Additional Duties of Excise (Goods with Special importance)
  5. Special Additional Duty of Customs (SAD)
  6. Additional Duties of Custom (CVD)
  7. Service Tax
  8. Surcharges and Cesses when related to goods and Services
  • State Taxes: 
  1. State VAT
  2. Luxury Tax
  3. Central Sales Tax
  4. Entertainment and amusement tax
  5. Entry Tax
  6. Advertisement Tax
  7. Lotteries, Gambling, and Betting Tax
  8. Purchase Tax

Commodities outside GST

  • Alcohol, when consumed by Human, will not be considered under the regulation of GST because of its defined lines.
  • Petroleum Crude
  • Natural gas
  • Motor Spirit
  • Aviation Turbine Fuel
  • High-speed diesel
  • Electricity

These things are kept out of GST for now but might be included in the revision of the GST features in future time. This will also help one while they know how to calculate GST and are trying to.

Who will Pay GST?

  • Businessmen and Traders will have to pay GST whose annual sales are above Rs 20 Lakhs.
  • For Northeastern or Special Category States, the limit for paying GST is above Rs 10 Lakhs.
  • Inter-state Trades are applicable to GST irrespective of the Limits.

Type of GST to be implemented

  • Dual GST with the imposition of tax based commonly by the Central and State. This will be an important part in how to calculate GST.
  • The GST that is imposed by the central or the intra-state supply of the goods and/or services will be termed as Central GST or CGST.
  • The GST that will be imposed by the States or Union Territories will be termed as State GST or SGST.
  • Another important part is Integrated GST which talks about the tax imposition for inter-state exchange or supply of good and/or services along with the SGST and CGST.

Calculation of GST

This is the most important part of the whole discussion about GST that is being gone on for some time now. Everyone should know how to calculate GST in order to have the best knowledge about it without any issues.

This will set a landmark for the whole tax system in India and will be implemented for deleting the number of taxes. Many services and products would become cheap, and some would have higher prices. There will be four different taxes with a multi-tier system, not the single-tier. The four different taxes are 5%, 12%, 18% and 28%. There is this different because of the different types of items like luxury or normal good and/or services. The GST can be calculated for different items by using the GST calculator.

Types of Supplies under GST: There are different types of supplies and goods that are taken into consideration while one wants to know in depth about GST. You should know this for the basic knowledge and also in order to find how to calculate GST.

  • Exempted and Taxable Supplies
  • Zero rated supplies
  • Intra-State and Inter-State Supplies
  • Mixed and Composite Supplies

Zero Rated Supply: The export or supply of good and/or services to the SEZ developers or the SEZ Units are known as Zero rated supply.

Tax Payers except for Supplier and Recipient: People in the Central or the State Government shall specify categories on which the taxes will be paid, and if the electronic commerce operators fall under the category, they ought to pay the taxes since they are the providers of the service.

Taxation of Good and Services under GST:

The CGST and SGST will impose taxes on every transaction regarding the supply of services and goods apart from the ones that are exempted from paying taxes, are below the thresholds and are outside the notions of GST. The both would be applied on the overall price unlike the State VAT, which is applied to the goods along with CENVAT. In the case of CGST, the recipient and the supplier both would be charged irrespective of any place or area, but SGST would be applicable if only of both the suppliers and recipients are located in the same state. This is applicable once one knows how to calculate GST.

Anti-Profiteering Mechanism: This is a clause under the GST law which states that the prices should not go up and there should not be any burden while the service is passed onto the consumers. This will act against all the profiteering business people and also cut the price, returning the benefit to the buyer with an 18% interest on the price or it will recover the amount if the buyer doesn’t show up or can be recognized. A business that is profiteering type can also lose its registration under GST.

Treatment of Imports: One should know very clearly how to calculate GST in order to know about this particular point. The imports will be treated under the inter-state supplies. They will attract the IGST or Integrated GST. Being said this, exports will not attract any kind of taxes. A refund will be made for all the taxes that are already paid for the raw materials or services while the export of goods or/and services took place.

Benefits of GST

While one is busy calculating the GST and knowing the methods of how to calculate GST it is also very important to know the different benefits of GST:

  • Business and Industry: A combination of the robust and the IT system will make up the GST for Indian areas. Thus all the services like registrations, payments, return, would be done, and available online to the tax payers and thus would make the whole system easier and also transparency would increase a lot. GST will also make sure that all the taxes around the country for different structures are same and thus the similarity would be maintained along with the ease of the business. The business system would be neutral on the application of GST. There will be less tax cascading and thus accumulation of tax. This will also reduce the cost of some hidden parts in the business. Competitiveness would increase since the transaction cost would be reduced in business. The cost of the goods and services manufactured in local areas would be lesser due to the subsuming taxes. This will again increase competitiveness and give some power to the locally made goods.

  • Central and State Governments: The different addition of taxes would be reduced by the application of GST. This will have the backbone of Robust IT system with end to end encryption which will make the whole process of transactions simple and very easy. Also, due to this robust IT system, the whole tax system would have a better confirmation about the payers. There will be no leakage in the whole system, and thus the transfers would be smoother in each stage and to another. This will also decrease the cost for the collection of taxes and revenues by the government and will further have high efficiency.

  • Consumers: There are many hidden costs that one can apply nowadays, which on the application of GST would be deducted since there would be no hidden cost for making the “tax on tax” or cascade of taxes. The CGST and SGST will take care of the complete tax system. There would be one single tax for the final consumer starting from the manufacturer which will finally result in the transparent nature of the whole Tax system. The consumers will be benefited since the overall burden of the tax will be reduced with the prevention of leakage. A consumer also must know how to calculate GST.

This is the basic knowledge about how one can calculate GST. Everyone should be informed about all the GST systems and also what will be the new imposed rates and also what will be the drop downs. This will benefit some people largely whereas would also affect some badly. In order to assure that you know everything, you must research well.

About the Author: Zack Walker

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