Imagine you're buying a new smartphone. The price you see includes not just the cost of the phone but also taxes. GST is one of those taxes, applied at every stage of production and sale. It's a bit like a relay race, where each runner adds value, and GST is applied at each step. The good news is that GST has simplified the tax system by replacing many older taxes.
Calculating GST is easier than you think. There are two main ways to do it:
To calculate exclusive GST:
Total Amount = Base Price + (Base Price × GST Rate)
Example: For a product costing ₹100 with 5% GST:
Total Amount = 100 + (100 × 0.05) = ₹105
For exclusive GST:
Total Amount = Base Price + (Base Price × GST Rate)
For inclusive GST:
Base Price = Total Price ÷ (1 + GST Rate)
Inclusive GST means tax is part of the displayed price. For example:
If a product costs ₹118 (inclusive of 18% GST), the base price is calculated as:
Base Price = 118 ÷ (1 + 0.18) = ₹100
Exclusive GST means tax is added to the base price. For example:
If a product costs ₹100 excluding 18% GST:
Total Amount = 100 + (100 × 0.18) = ₹118
| Feature | Inclusive GST | Exclusive GST |
|---|---|---|
| Definition | Tax included in the displayed price | Tax added separately to the base price |
| Customer Impact | Simplifies pricing for customers | Requires customers to calculate final cost |
| Example | Displayed price: ₹25,000 (includes tax) | Base price: ₹500 + tax: ₹60 |