What is GST?
GST stands for Goods and Services Tax, which is a comprehensive indirect tax levied on the manufacture, sale, and consumption of goods and services in India. GST is a destination-based tax system, which means that the tax is collected by the state where the goods or services are consumed, rather than where they are produced.
Components of GST
There are three components of GST: CGST, SGST, and IGST.
CGST: It is the tax levied by the Central Government on intra-state (within the same state) supplies of goods and services.
SGST: It is the tax levied by the State Government on intra-state (within the same state) supplies of goods and services.
IGST: It is the tax levied by the Central Government on inter-state (between different states) supplies of goods and services.
GST Rates
GST rates are divided into 4 categories:
0% - No tax is levied on essential items such as food, books, and healthcare services.
5% - Tax is levied on items of mass consumption such as footwear, textiles, and packaged food items.
12% - Tax is levied on items such as computers, processed foods, and mobile phones.
18% and 28% - Tax is levied on luxury items such as automobiles, high-end electronics, and aerated drinks
The formula for calculating GST (Goods and Services Tax) in India is as follows:
GST = (Original Cost x GST rate) / 100
Where,
Original Cost: The cost of the product or service before GST is added.
GST Rate: The rate of GST applicable on the product or service, which depends on its category.
For example, if the original cost of a product is Rs. 1,000 and the GST rate is 18%, then the GST calculation will be as follows:
GST = (1000 x 18) / 100
GST = 180
Therefore, the total cost of the product including GST will be:
Total Cost = Original Cost + GST
Total Cost = 1000 + 180
Total Cost = Rs. 1180
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