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How to Calculate GST?

Calculate GST

For any taxpayer calculating GST payable for the GST Return filing is not less than a rocket science. The taxpayer has to take everything into consideration while calculating GST such as inter and intrastate supplies, exempted supplies and reverse charge including eligibility of the ITC. Because if a taxpayer pay-off less amount of GST payable then a penalty of 18% is levied on the remaining amount.

So to solve this calculation here is the step by step guide

1. Determining the value of supplies

Any taxpayer can determine the value of supplies by following the below-mentioned procedure

•   Open market value of supply

•   When the open market value is not available then the total consideration paid in cash or equivalent to cash at the time of supply.

•   If the above two cases are not applicable then the value of supply shall be based on the similar product or service.

•   If still the value of supply can not be determined then sum total of consideration paid in cash or equivalent to cash determined by either residual or cost method.

Finding the applicable GST rate

Searching for the GST rate that is applicable to the supplies for the calculation of GST is another tough task for the taxpayer. There are hundreds of products and services that are under GST act having different GST rate.

Finding HSN code or SAC code

Every taxpayer shall know that what kind of supply they are dealing in. In other words, if the supply is of product or services.

In case the supply is product based then it is important to know the HSN code and

If the supply is service based then the SAC code must be well known by the taxpayer.

Determining the GST tax rate by SAC or HSN code

Once the taxpayer determines if the supply includes services or products then the GST rate can be easily calculated by using the HSN code or SAC code. There are different slabs of GST rates that are applicable for different products or services.

You can easily find out the slab rate by using HSN Code List & GST Rate Finder

2. Applicability of SGST, CGST or IGST

Once the taxpayer pulled off the GST rate of the supply, he needs to find which type of tax is applicable to supplies. The type of taxes under GST includes

•   SGST

•   CGST

•   IGST

these taxes completely rely on the location of supplier or place of supply.

Intrastate supply: If the location of supplier & the place of supply is in the same state or union territory then SGST (State Goods and Services Tax) and CGST (Central Goods and Services Tax ) shall be applied to that good.

Inter-state supply: When the location of supplier & place of supply are in two different states or union territory on that good IGST (Integrated Goods and Services Tax) shall be applied.

Calculating SGST, CGST and IGST

Every taxpayer shall calculate the SGST, CGST and IGST to know the input tax credit availability. This also ensures that tax rate would remain similar throughout eliminating the scope of double taxation too.

If the supply is intra-state then the tax shall be bifurcated between SGST and CGST equally. But in the case when the supply is inter-state than the tax amount shall be accounted under IGST.

3. Verifying if GST is reverse chargeable

Generally, under GST the supplier of goods and services is bound to collect the tax from the recipient. The supplier is liable to pay tax to the government but under the reverse charge system, the service recipient is liable to pay taxes under GST instead of the supplier.

4. Checking if the supplier is registered under GST composition scheme

Any businesses who do not want to maintain the records and whose turnover is less than 1.5 crore INR can opt for GST composition scheme. In the composition scheme, the taxpayer has to pay a flat GST tax rate as mentioned in the GST Act.

In this case, the supplier has to mention that the recipient of services or products is under GST composition scheme on the generated invoices.

5. Type of transaction

The transactions between the supplier and recipient can be bifurcated into 3 type

•   Business to Business (B2B)

•   Business to Customer (B2C) where the value of supply is less than 2.5 lakhs INR.

•   Business to Customer (B2C) where the value of supply is less than 2.5 lakhs INR.

In case there is a transaction between Business to Business (B2B) then both the businesses are eligible for input tax credit. To use the input tax credit both the supplier and recipient of the goods or services shall have valid GSTIN.

When the transaction takes place between Business to Customer (B2C) then no input tax credit will be available for any of the party.