How to Calculate GST: Formulas and Worked Examples

Use this when you have a price before tax — a wholesale rate, a service fee, or a quotation marked “+ GST”.

1. Price before GST: ₹25,000; rate: 18%.
2. GST = 25,000 × 18 ÷ 100 = ₹4,500.
3. Total = 25,000 + 4,500 = ₹29,500.

Use this for MRPs and any amount that already includes tax. For ₹29,500 at 18%: 29,500 × 100 ÷ 118 = ₹25,000, so GST is ₹4,500.

The customer pays the same total either way. What changes is which government receives the tax, and which ledger the buyer uses to claim input tax credit.

Calculate GST line by line when items carry different rates, then add up the taxable values and tax amounts separately. An invoice with ₹10,000 of goods at 5% and ₹4,000 at 18% has a taxable value of ₹14,000 and GST of ₹500 + ₹720 = ₹1,220, so the total is ₹15,220.

The rate depends on the HSN code (goods) or SAC code (services) of what you supply, read with the notifications in force. After the rate rationalisation effective 22 September 2025, most items fall under 5% or 18%, with 40% for specified goods. Always confirm your item's rate on an official source before invoicing.

Notice that the GST inside an inclusive price is always less than the rate applied to that price: 18% of ₹1,000 is ₹180, but the GST inside ₹1,000 is only ₹152.54. That's because the tax was charged on the lower, pre-tax figure. The GST Calculator works in both directions.

A discount shown on the invoice at the time of sale reduces the taxable value, so GST is charged on the discounted price. A ₹1,000 item with a 10% discount has a taxable value of ₹900; at 18% the GST is ₹162 and the invoice total is ₹1,062.

Discounts given after the sale — year-end volume rebates, for example — can reduce the tax only if conditions in the GST law are met, such as the discount being agreed beforehand and linked to specific invoices, with a credit note issued. Otherwise GST stays on the original value. The GST Discount Calculator handles the at-sale case.

Normally the supplier collects GST and pays it to the government. Under the reverse charge mechanism, the recipient pays it instead. It applies to notified goods and services — for example, goods transport agency services and legal services from an advocate supplied to a business — and to certain purchases from unregistered suppliers where notified.

The rate and calculation are the same; only who pays changes. An invoice for a reverse-charge supply must say that tax is payable on reverse charge.

Small businesses that opt for the composition scheme don't charge GST on their bills and can't claim input tax credit. Instead they pay tax at a fixed rate on turnover: 1% for manufacturers and traders, 5% for restaurants and 6% for eligible service providers. They issue a bill of supply, not a tax invoice. The turnover limit for goods is ₹1.5 crore in most states (lower in some special category states), and ₹50 lakh for service providers.

1. Taking the rate of an inclusive price. 18% of ₹1,180 is ₹212.40, but the GST inside it is ₹180. Always divide by 1.18 first.
2. Using an old rate. Most items earlier taxed at 12% moved to 5% and most at 28% moved to 18% from 22 September 2025. See GST 2.0 rates explained.
3. Charging IGST on a local sale (or the reverse). The place of supply, not the buyer's billing address alone, decides the tax type.
4. Rounding each line and the total differently. Calculate tax per line to the paisa, add up, then round the invoice total once.
5. Counting GST as income. GST collected belongs to the government after input tax credit; your revenue is the taxable value.

GST is charged at every stage, but each registered business pays only on the value it adds, because it claims credit for the GST it paid on purchases (input tax credit).

The government collects ₹270 in total — exactly 18% of the final ₹1,500 price — and the final consumer bears it. That's why a business's cost and margin should always be calculated without GST, and why a buyer's missing GSTIN on your invoice matters: without it, they can't claim the ₹180.