How to calculate GST like a pro
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How to calculate GST like a pro

  • Highlights

  • Find the GST rate by HSC or SAC code

  • Determine the place of supply

  • Reverse charges may be applicable

  • The type of transaction may affect GST payable

You may think that with GST, filing your tax returns got a lot more challenging, but the good news is that you can do it online and with ease by knowing just a few basics.

Here’s a step-by-step guide to help you calculate your GST.

Why you should calculate GST in advance

Under the GST regime, there is an 18% interest on any shortfall in tax payments, which is enough of a reason to make most taxpayers eager to stay on top of their dues. That being said, GST has made it a lot easier to remain tax compliant by consolidating all of the various indirect state and central taxes under one umbrella.

Calculating GST won’t only ensure that you are remaining compliant and avoiding any late-payment dues, but also setting aside the amount in advance, so you can budget your monthly expenses better.

Find the HSN or SAC code

You first need to determine the HSN or SAC code of the goods or service you are paying taxes on. HSN codes are a international system for identifying goods, while SAC codes correspond to a type of service. Once you’ve determined the code, you can look up the corresponding tax. GST is levied on one of five slab rates: nil, 5%, 12%, 18% and 28%, so the tax would be any on of those amounts.

Determine the applicability of IGST or CGST and SGST

It is important to know whether your taxes fall under an Integrated Goods and Services Tax or State and Central GST classification. IGST is taxed on goods and services supplied from one state to another; whereas CGST and SGST is levied in goods and services supplied within a single state. It is important to remember that IGST, CGST and SGST are merely modes of classification that are meant to direct the revenue towards the state of consumption-the tax rates do not change for the taxpayer.

Determine reverse charge services

If you’re looking at your tax liability in relation to a particular service, you need to determine whether it is a reverse charge service. While the liability for being GST compliant typically falls on the supplier of the goods or service, reverse charge services redirect the onus of GST payment onto the recipient of the service. The list of reverse charge services is exhaustive, and includes Online Information and Database Access and Retrieval services, services provided by Goods Transport Agency, services provided by advocates, whether individually or as a firm, sponsorship services, and services provided by an insurance agent, to name a few.

Determine the type of transaction

If your transaction is a business to business transaction, you may be eligible for a GST input tax credit, but this can only be made available if the both supplier and recipient have a GSTIN—the number they provide you with when you register for GST. Business to consumer transactions are not eligible for input tax credits; however, if your transaction is over Rs.2.5 lakhs, you will be required to furnish identification details.

GST Composition Scheme

If the annual turnover of your business is less than Rs.75 lakhs, you are eligible for the GST Composition Scheme, which will allow you to pay GST at a fixed rate of turnover. However, opting for the composition scheme means you cannot claim input tax credits, and cannot supply goods out of state. You will also need to pay reverse charge service rates at the normal rates. Certain dealers are entirely exempt from the composition scheme, and these include suppliers of services (although restaurant related services may still qualify), manufacturers of paan masala, tobacco or ice cream and businesses that supply goods through an e-commerce operator.

You may also wish to calculate your GST liability on one of several third-party online GST calculators. These calculators are efficient, and help you stay on track of the various complexities of the GST regime.

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