What Is GST?
Goods and Services Tax is an indirect tax on supplies of goods and services in India. Businesses registered under GST collect tax from customers and report eligible transactions through the GST system.
CGST, SGST and IGST
For a typical intra-state supply, the GST amount is divided between CGST and SGST/UTGST. For an inter-state supply, IGST is generally charged. The split shown on an invoice depends on the nature and place of supply.
What Is GST?
Goods and Services Tax (GST) is an indirect tax applied to supplies of goods and services under India’s GST framework. The amount charged to a customer depends on the taxable value, the applicable GST rate and whether the transaction is intra-state or inter-state.
How to Add GST to a Price
When the quoted amount is before GST, the GST amount is calculated by multiplying the taxable value by the GST rate. For example, at 18% GST on a taxable value of ₹1,000, GST is ₹180 and the invoice total is ₹1,180.
Formula: GST = Taxable value × GST rate ÷ 100. Total price = Taxable value + GST.
How to Remove GST From an Inclusive Price
If a displayed price already includes GST, you cannot simply subtract 18% from the total. The taxable value is calculated by dividing the inclusive amount by 1 plus the GST rate. At 18%, the taxable value is inclusive price ÷ 1.18 and the GST component is the difference between the inclusive price and taxable value.
CGST, SGST and IGST Explained
For an intra-state supply, GST may be split between CGST and SGST/UTGST, subject to the applicable rules. For an inter-state supply, IGST is generally charged. For a simple 18% intra-state example, the tax can be shown as 9% CGST plus 9% SGST.
GST-Exclusive vs GST-Inclusive Prices
A GST-exclusive quote shows the taxable price before GST is added. A GST-inclusive quote already contains the GST component. Always confirm which basis a supplier is using before comparing prices, especially when comparing online prices, business quotations or invoices.
Example: 18% GST on ₹2,500
If ₹2,500 is the taxable value, 18% GST is ₹450 and the total becomes ₹2,950. If ₹2,950 is already GST-inclusive at 18%, the taxable value is ₹2,500 and the GST component is ₹450. The two calculations look different because the starting amounts mean different things.
GST Rate Selection Matters
GST rates are not one universal percentage for every product or service. The applicable rate depends on the classification and rules for the supply. A calculator can correctly perform the arithmetic for the rate you select, but it cannot determine the legal classification of your product or service.
GST and Input Tax Credit
For eligible registered businesses, input tax credit can reduce the net GST payable subject to the conditions and restrictions under GST law. The GST shown on a customer invoice is therefore not necessarily the same as the final cash tax burden of a business.
What a GST Invoice Usually Shows
- Supplier and recipient details as applicable
- Invoice number and date
- Description and taxable value
- Applicable GST rate
- CGST/SGST or IGST components where relevant
- Total invoice value