HOW GST IS CALCULATED ?

The calculation of Goods and Services Tax (GST) involves determining the tax liability on the supply of goods and services. The GST amount is computed using the following formula:

GST Amount = {GST Rate/100} *{Taxable Amount} 

And the Total Amount (including GST) is calculated as:

Total Amount = Taxable Amount + GST Amount

Here’s a breakdown of the terms used in the formulas:

1. GST Amount: This is the actual tax amount that needs to be paid on a taxable supply of goods or services. It is calculated as a percentage of the taxable amount.

2. GST Rate: The GST rate is expressed as a percentage and varies based on the type of goods or services. In India, there are multiple GST rate slabs such as 5%, 12%, 18%, and 28%.

3. Taxable Amount: This is the value on which GST is applied. It includes the actual price of the goods or services supplied.

4. Total Amount (including GST): This is the final amount that the consumer pays, inclusive of the GST amount.

It’s important to note that businesses can also claim Input Tax Credit (ITC) on the GST paid on their inputs. The net tax paid is the GST amount on the output minus the ITC. The formula for the net GST payable is:

Net GST Payable = GST on Output – ITC

This mechanism ensures that tax is paid only on the value addition at each stage of the supply chain. The implementation of GST aims to eliminate the cascading effect of taxes, promote transparency, and simplify the taxation system.