What is GST (Goods and Services Tax)?
GST (Goods and Services Tax) is a comprehensive indirect tax levied on the supply of goods and services in India, replacing multiple cascading taxes like VAT, Service Tax, and Excise Duty. Implemented on July 1, 2017, GST follows a destination-based taxation model.
GST is divided into CGST (Central GST — collected by the Central Government), SGST (State GST — collected by the State Government) for intra-state transactions, and IGST (Integrated GST — collected by the Central Government) for inter-state transactions.
India has four primary GST slab rates: 5% for essential goods, 12% for standard goods, 18% for most services and goods, and 28% for luxury and demerit goods. Some essential items like unprocessed food and milk are exempt (0% GST).
GST Calculation Formulas
Exclusive GST (Adding GST to Net Price)
Total Price = Net Price + GST Amount
Inclusive GST (Extracting GST from Total Price)
Net Price = Total Price − GST Amount
Tax Component Split
- Intra-state: CGST = GST/2, SGST = GST/2
- Inter-state: IGST = Full GST Amount
Step-by-Step GST Calculation Example
Scenario: A product costs ₹10,000 (net price) with 18% GST, sold within the same state.
Step 1: Calculate GST Amount
Step 2: Split into Components
- CGST (9%) = ₹900
- SGST (9%) = ₹900
Step 3: Total Price
For inter-state supply, the entire ₹1,800 would be collected as IGST instead of splitting into CGST and SGST.