What is GST ? How to Calculate GST ?

0

In most countries that have a GST system, businesses are responsible for collecting GST from their customers and then remitting it to the government. Businesses that are registered for GST are called “taxable persons” and are typically required to charge GST on their supplies of goods and services. They are also eligible to claim back the GST they have paid on their purchases, known as Input Tax Credit (ITC).

For example, if a business registered for GST purchases $1000 worth of goods from a supplier, and the GST rate is 18%, the GST amount paid would be $180 (100018/100). If the business then sells those goods to a customer for $1200, it would charge the customer $216 (120018/100) as GST. The business would then remit $36 (216-180) to the government, as the GST collected from the customer is more than the GST paid on the purchase.

The GST is a consumption-based tax, which means it is only charged on the final consumption of goods and services, not on the production or distribution of them. This is why businesses can claim back the GST they have paid on their purchases.

It’s important to note that GST is a value-added tax (VAT), which means that the tax is applied to the value added at each stage of the supply chain. This helps to ensure that the overall burden of the tax is spread as widely as possible, and that the final consumer bears the majority of the tax.

In some countries, there’s also a different GST rate for different goods and services, depending on the kind of product it is. For example, basic necessities like food items are taxed at a lower rate or may be tax-free, while luxury goods may be taxed at a higher rate.

It’s also important to note that GST is a destination-based tax, which means that the tax is imposed on the place where the goods or services are consumed and not on the place of origin. This is why GST is also known as a ‘Consumption Tax’.

To calculate GST (Goods and Services Tax), you’ll need to know the GST rate (which is currently 5% in Canada and 18% in India, for example) and the total cost of the goods or services being purchased. Here’s the formula to calculate GST:

GST Amount = Total Cost x GST Rate / 100

For example, if you are purchasing a product for $100 and the GST rate is 5%, the GST amount would be:

GST Amount = 100 x 5 / 100 = $5

The final price of the product would be:

Total Price = Total Cost + GST Amount = 100 + 5 = $105

if you want to find out the net price of the product before GST you can use this formula:

Net Price=Total Price/((GST Rate/100)+1)

This is a simple method to calculate GST. Please check with your jurisdiction for the GST rate and other rules for GST calculation, it might vary depending on the jurisdiction or the kind of goods/services.

Leave a Reply

Your email address will not be published. Required fields are marked *