How GST works
Goods and Services Tax is a consumption tax applied at each stage of the supply chain, with businesses claiming credit for tax already paid on their inputs. The effect is that tax is ultimately borne by the final consumer, and the cascading of tax upon tax that characterised earlier systems is avoided.
India's GST, introduced in July 2017, replaced a patchwork of central and state levies including excise duty, service tax and VAT.
The two directions
Adding GST to an exclusive amount is straightforward multiplication: the tax is the rate applied to the base value.
Removing GST from an inclusive amount is where errors happen. You cannot simply subtract 18 percent from a GST-inclusive figure, because that 18 percent was calculated on the smaller base, not on the total. The correct approach is to divide the inclusive amount by 1.18 to recover the base, then subtract to find the tax. Getting this backwards understates the base value and is a common bookkeeping mistake.
CGST, SGST and IGST
The tax splits differently depending on whether a transaction crosses a state boundary. For a supply within a state, the total rate divides equally between Central GST and State GST — an 18 percent rate becomes 9 percent CGST plus 9 percent SGST. For interstate supplies, a single Integrated GST is charged at the full rate and later apportioned between the centre and the destination state.
The total tax is identical either way; only the allocation differs. Getting the classification wrong on an invoice creates reconciliation problems in GST returns, so it matters for compliance even though the customer pays the same.
The rate slabs
India operates several rates. Essential goods often attract 0 or 5 percent, standard goods and many services 12 or 18 percent, and luxury or demerit goods 28 percent, sometimes with an additional cess. Special rates of 0.25 and 3 percent apply to precious stones and gold respectively.
Rates are revised periodically by the GST Council, so verify the current rate for your specific goods or service category rather than relying on memory.
Input tax credit
Registered businesses can offset GST paid on purchases against GST collected on sales, remitting only the difference. This is the mechanism that prevents tax cascading, and it is why registration is often worthwhile even below the threshold when your customers are themselves registered businesses.
A necessary caveat
This calculator performs arithmetic on the figures and rate you supply. It is not tax advice, does not determine which rate applies to your goods or services, and does not account for cess, reverse charge, or exemptions. For anything with compliance consequences, consult a qualified tax professional.
Frequently Asked Questions
How do I remove GST from an inclusive price?
Divide by 1 plus the rate as a decimal. For 18 percent, divide the inclusive amount by 1.18 to get the base value. Subtracting 18 percent directly gives the wrong answer.
What is the difference between CGST, SGST and IGST?
Within a state the tax splits equally into CGST and SGST. Across states a single IGST is charged at the full rate. The total is the same either way.
Which GST rate applies to my product?
Rates depend on the HSN or SAC classification and are revised periodically. Check the current official rate for your specific category.
What is input tax credit?
Registered businesses offset GST paid on purchases against GST collected on sales, remitting only the difference. It prevents tax cascading through the supply chain.
Is this calculator tax advice?
No. It performs arithmetic only and does not account for cess, reverse charge or exemptions. Consult a qualified professional for compliance matters.