GST Tax Calculator Formula in India [Computing Selling Price, Excel] (Retailer,
Wholesaler, manufacturer) B2B and B2C
Since last few months GST has been created a much buzz across the country. The central government has announced about the new tax structure back in the month of June 2017. Since then many a people have started speculating about the consequences of the same on daily expenses.
Goods and Services tax aka GST is a single taxation on final value of all the goods and services produced in an economy during a financial year. This new structure is launched to replace the Value Added Tax or VAT that used to levy on the goods and services earlier. GST calculation is much easier for many whereas many of the tax payers and manufacturers are still in awe how to calculate GST rates on various products.
Steps to calculate GST:
There are few steps that one must consider while calculating GST. These steps are for those who are still not aware of what GST is and how to levy it on their manufactured goods and services.
- Step 1: Determine whether the GST is applicable or not: At the time of GST launch the authority has declared about the goods and services on which the GST will be levied. First of all find out whether GST is applicable on your product or services or not.
- Step 2: Know the HSN / SAC: If you are manufacturing a good then HSN code must be known to you for GST application. On the other for a service provider SAC codes must be there before GST calculation.
- Step 3: SGSAT, CGST or IGST: If your product is applicable under GST, then the next step will be to determine whether SGST, CGST or IGST is applicable for your goods and services. If you are trading within the state premise, only SGST and CGST will be charged. If your product is traded interstates for example from West Bengal to Mumbai, then IGST will be levied.
- Step 4: Type of trade: After that determine the type of trade you are opting. Whether it is B2B that is Business to Business or B2C that is Business to Customer must be decided. In case of B2C the value either can be less than 2.5 Lac or more than that. That must also be decided.
- Step 5: The slab of GST: Finally one has to determine what the slab is his/her business is falling under. There are 5 slabs in GST such as Nil, 5%, 12%, 18% and 28% respectively.
GST Calculation Formula
GST is levied on the final goods of the manufacturers. This can be explained with a simple mathematical formula mentioned below.
If the product’s original price is Y and GST is 12% then the final price will be,
Y + [Yx12/100]
That is, Original Price + {Original Price x GST rate}/100 = Final Price
Following this simple formula one can calculate the GST rates on their products. Also there are online calculator available where one needs to put up the original price of the good and the type of trade (intra state or interstate) then the calculator will calculate the rate of GST as well as the final price.
Product Final Pricing: Before and After GST:
A comparative study can be done with a numerical example to understand GST more clearly for the people who are still not accustomed with the new tax structure. Let us consider a Mr. A, he has traded a good within a state Maharashtra at Rs. 10, 000/- which is the original price of the good.
Before GST:
Let us consider Mr. A has sold the product to Mr. B lives in Bangalore at Rs. 10, 000/-. Before GST the final invoice would be:
Original Cost: 10000/-
VAT @ 10%: 1000/-
Cost Price: 11000/-
Profit: 1000/-
Selling Price of the good: 12000/-
CST @ 10%: 1200/-
Final Price to the consumer: 13200/-
After GST:
Original Cost of the good: 10000/-
SGST @ 5% = 500/- and CGST @ 5% = 500/-
Cost Price: 11000/-
Profit: 1000/-
Selling Price: 12000/-
IGST @ 10% on the cost price: 1100/-
Final Price to the consumer: Rs. 13100/-
GST: Manufacturer, Wholesaler and Retailer:
In the previous example it is said that if Mr. A is trading the goods to Mr. B (consumer) then how the invoice will be like. However there are many more stages before the product reaches to the costumer. From manufacturer to the wholesaler to retailer, all these stages are being covered in the next section with a numerical example for better understanding.
For the manufacturer:
Let us consider an example of trading a good that costs Rs. 10000/-.
| Before GST | After GST | |
| Cost of product | 10000 | 10000 |
| Excise Duty @12% | 1200 | Nil |
| Profit @10% | 1000 | 1000 |
| Total | 12200 | 11000 |
| VAT @ 12.5% | 1525 | Nil |
| CGST @ 6% | Nil | 660 |
| SGST @ 6% | Nil | 660 |
| Final Invoice to the Wholesaler | 13725 | 12320 |
For the Wholesaler:
Now the cost price of the wholesaler will be 13725/- in previous tax structure and 12320/- for the GST structure.
| Before GST | After GST | |
| Cost of Product | 13725 | 12320 |
| Profit @ 10% | 1372.5 | 1232 |
| Total Value | 15097.5 | 13552 |
| VAT @ 12.5% | 1887.2 | Nil |
| CGST @ 6% | Nil | 813.1 |
| SGST @ 6% | Nil | 813.1 |
| Final invoice to the Retailer | 16984.7 | 15178.2 |
For the Retailer
Finally the product will reach to the retailer for final sales. The two final invoice rates will be the cost price for the retailers of the particular product.
| Before GST | After GST | |
| Cost of product | 16985 | 15178 |
| Profit @ 10% | 1698.5 | 1517.8 |
| Total Value | 18683.5 | 16695.8 |
| VAT @ 12.5% | 2335.45 | Nil |
| CGST @ 6% | Nil | 1001.75 |
| SGST @ 6% | Nil | 1001.75 |
| Final Price to the consumer | 21018.95 | 18699.3 |
From the above example it is clear that the old tax structure is far more expensive than GST. The biggest benefit of the GST is, it reduces the cost of production in each level. This helps the consumer to get freed from heavy burden of taxes. Also the benefit of input tax credit helps the manufacturer and wholesalers to get their already paid taxes at the time of ITR filing.
Now consider an example if the product is traded interstate to someone else. Then IGST or Integrated Goods and Services Tax will be levied.
If the cost of the production is Rs. 10000/- then the final price invoice will be,
- Original price = 10000/-
- IGST @ 12% = 1200/-
- Total Value: 11200/-
Before GST the price would be,
- Original Price = 10000/-
- VAT @ 12.5% = 1250/-
- Total Value = 11250/-
- CST @ 2% = 225/-
- Total Value = 11475/-
In case of interstate transactions GST makes the product cheaper than the old structure. There are many benefits come with GST that will help the manufacturers as well as consumers to get the items in much cheaper rate than before.
Advantages of GST Calculation
- GST is much easier to calculate than the earlier version of tax structure. This is one of the most important advantages of GST. Also there is only one tax that is implemented on the final value of the product and services.
- GST calculation leads to clarity of the tax structure as well as the amount of tax manufacturers and consumers are carrying for a single good.
- There are 5 clear slabs under GST structure. It is clearly mentioned about the products and services that come under each slab. Hence it is much easier now for the manufacturer to determine whether their goods and services are falling under GST or not.
- The input tax credit helps the manufacturer, wholesaler and the retailer to get back their already paid taxes at the time of Income Tax Return filing. The portion of tax wholesaler is paying to manufacturer will be deducted while paying his own IT.
- Economically inflation will be expected to reduce in future after implementing GST in India. As the cost of product is getting lower, the selling price will come down as well to control inflation.
Changes in the tax structure
As you can see VAT, Excise Duty, CST all are removed from the tax structure now. Instead now we have SGST and CGST. If the product is traded out of the state then IGST is imposed at a flat rate. There are much lesser complications unlike before. Also there will be a steady fall in input tax credit by both the manufacturers and wholesalers.
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