3 min read
25 May 2021

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

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.

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 reason to make most taxpayers eager to stay on top of their dues.

Calculating GST ensures that you remain compliant, avoid late payment dues, and set aside the amount in advance to better budget your monthly expenses.

How is GST calculated?

Know how to calculate GST with the help of the below example:

If the goods or service are valued at Rs. 10,000 and the applicable GST rate is 18%, then the net price of the goods or service will be = 10,000+ (10,000X18%) = 10,000+1800 = Rs. 11,800

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

Step 1: Find the HSN or SAC code

You first need to determine the HSN or SAC code of the goods or services you are pay taxes for. HSN codes are an 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 gets levied on one of five slab rates: nil, 5%, 12%, 18%, and 28%, so the tax would be any one of those amounts.

Step 2: Determine the applicability of IGST or CGST and SGST

It is essential 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 get levied on goods and services supplied within a single state. It is important to remember that IGST, CGST, and SGST are merely modes of classification meant to direct the revenue towards the state of consumption-the tax rates do not change for the taxpayer.

Step 3: Determine reverse charge services

If you’re looking at your tax liability concerning 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 service recipient. The list of reverse charge services is exhaustive. It includes online information and database access and retrieval services, services provided by goods transport agencies, services provided by advocates, whether individually or as a firm, sponsorship services, and services provided by an insurance agent, to name a few.

Step 4: 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 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 lakh, you will be required to furnish identification details.

Step 5: GST composition scheme

If the annual turnover of your business is less than Rs. 75 lakh, 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 supply goods out of state. You will also need to pay reverse charge service rates at the standard rates. Specific dealers are entirely exempt from the composition scheme. 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 with the various complexities of the GST regime.

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