What Is GST (Goods and Services Tax)?
GST (Goods and Services Tax) is a comprehensive, multi-stage, destination-based indirect tax levied on every value addition in the supply chain. Introduced in India in July 2017, it replaced a complex web of central and state taxes including VAT, service tax, central excise, and octroi. GST follows a dual structure with CGST (Central GST) and SGST (State GST) for intra-state transactions, and IGST (Integrated GST) for inter-state transactions.
GST Tax Slabs and Which Goods Fall Where
India's GST operates under four primary slabs. The 5% slab covers essential commodities like food grains, packaged foods, healthcare products, and economy hotel stays. The 12% slab covers processed foods, computers, and business hotels. The 18% slab is the most common and covers electronics, financial services, software, and restaurants. The 28% slab applies to luxury items, automobiles, tobacco, and aerated beverages.
How to Calculate GST: Adding GST to a Price
To add GST to a base price: Gross Amount = Net Amount × (1 + GST Rate/100). For example, a product priced at ₹1,000 with 18% GST: Gross = ₹1,000 × 1.18 = ₹1,180. CGST = ₹90 (9%), SGST = ₹90 (9%). The seller collects the full ₹1,180 from the customer, remits ₹180 to the government, and keeps ₹1,000.
How to Remove GST from a Gross Price (Reverse Calculation)
To remove GST from an inclusive price: Net Amount = Gross Amount / (1 + GST Rate/100). For example, if an item is priced at ₹1,180 inclusive of 18% GST: Net = ₹1,180 / 1.18 = ₹1,000. GST Amount = ₹1,180 – ₹1,000 = ₹180. This reverse calculation is useful for businesses claiming GST Input Tax Credit (ITC) on purchases.
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