GST, or Goods and Services Tax, is basically an indirect tax that is imposed on goods and services. It is a multi-stage, comprehensive, and destination-based tax. The GST Act came into force on 1st July 2017 and took the place of all the indirect taxes in India.
Under this act, goods and services are divided into five different tax rates—0%, 5%, 12%, 18%, and 28%. This unified system of taxation allows taxpayers to estimate the amount of tax levied at various stages of different goods and services.
If you are a business owner, it is important for you to understand how GST is calculated. It can be a hassle to calculate it manually. However, GST calculators are here to help you out. This article will help you understand every important thing you need to know about a GST calculator
What is a GST Calculator?
A GST calculator refers to an online easy-to-use tool that can help you estimate the payable GST for a specific period of time depending on the amount. This financial instrument can be advantageous for both buyers and sellers.
Benefits of Using a GST Calculator
A simple GST calculator can allow you to determine the price of the net or gross product based on the amount. It can also provide a split of percentage-based rates. Users can get a division of rate between CGST (Central Goods and Service Tax) and SGST (State Goods and Services Tax).
The formula for Calculating GST
Any manufacturer, retailer, wholesaler, or business owner can calculate the GST using the following formula:
GST Amount = (GST% x Original Cost)/100
Net Price = GST Amount + Original Cost
GST Amount = Original Cost – [Original Cost x (100/ (100+GST%)]
Net Price = Original Cost – GST Amount
Let us take an example to better understand the GST calculation. If a product is sold for Rs. 2000 and the GST rate applicable is 12%, then the net price of the product is going to be Rs. 2000 plus 12% of Rs. 2000.
This will come out as Rs. 2000 + Rs. 240 = Rs. 2,240.
How to Use a GST Calculator?
There are many websites that offer this tool. The best GST calculator can help you calculate GST quickly and accurately. All the online GST calculators may work differently, however here are general steps you can follow to estimate GST:
- First, you will need to enter a few details, including the net amount of the good or service and the GST rate applicable.
- After that, you can just click on the calculate button. The tax amount for each tax head, including SGST or IGST and CGST, will be displayed on your screen within a minute. You can also determine the final price of the goods or services to be billed.
Calculate GST and Create Invoices with Razorpay
Since the implementation of the GST Act, all indirect taxes, such as VAT and CST, have ceased to exist. Today, GST is levied on the sale of almost all goods and services. If you have a business, you might need to calculate GST. Razorpay allows you to calculate GST by just entering the cost of goods and services along with the GST rate.
With Razorpay, you can not only determine GST but also create and send GST-compliant invoices. You can improve your cash flow and get paid faster with Razorpay. Visit their official website today to learn more about their services.