How GST is Calculated in India

Since its introduction in July 2017, the Goods and Services Tax (GST) has revolutionized India's tax system. But for many business owners and freelancers, calculating it correctly is still a headache.

The Current GST Slabs

Before calculating, you need to know the applicable rate for your product or service:

• 5%: Household necessities, edibles, transport services.
• 12%: Processed foods, mobiles, some construction work.
• 18%: Most services, electronics, capital goods (The most common slab).
• 28%: Luxury items, cars, tobacco, cement.

1. GST Exclusive Calculation

This is when you have a base price and need to add tax to it.

Formula: GST Amount = (Original Cost x GST Rate) / 100
Net Price: Original Cost + GST Amount

Example: A web design service costs Rs. 10,000 (plus 18% GST).
GST = 10,000 x 0.18 = Rs. 1,800.
Total Bill to Client: Rs. 11,800.

2. GST Inclusive Calculation

This is when you have a final price (MRP) and need to back-calculate to find the base price and tax component.

Formula: GST Amount = Total Price - [Total Price / (1 + GST Rate/100)]

Example: You bought a phone for Rs. 23,600 (inclusive of 18% GST).
Base Price = 23,600 / 1.18 = Rs. 20,000.
GST Component = 23,600 - 20,000 = Rs. 3,600.

Conclusion

Whether you are a freelancer raising an invoice or a consumer checking a bill, understanding these simple formulas prevents overpayment and ensures compliance.