GST Explained: How Goods and Services Tax Works
Goods and Services Tax (GST) is a value-added tax levied on the supply of goods and services. It is applied in many countries including India, Australia, Canada, New Zealand, and Singapore. While the name and structure vary slightly by country, the fundamental principle is the same: tax is collected at each stage of the supply chain, and businesses can claim credits for the GST they have already paid on their inputs. The end consumer pays the final tax burden.
India's GST System
India implemented a comprehensive dual GST system in July 2017, replacing a complex web of central and state taxes. The system has four main rate slabs. The 5% rate applies to essential goods and services such as some foods, transport, and medicines. The 12% rate covers processed food, computers, and some business services. The 18% rate applies to most services, electronics, and non-essential goods. The 28% rate covers luxury items, high-end vehicles, tobacco, and carbonated drinks. A 0% rate (nil) applies to essential staples like unprocessed food grains, fresh vegetables, and milk.
CGST, SGST, and IGST
India's GST has three components. For intra-state transactions (within the same state), both Central GST (CGST) and State GST (SGST) are levied, each at half the applicable rate. So an 18% GST on an intra-state supply is split as 9% CGST + 9% SGST. For inter-state transactions (between states), Integrated GST (IGST) is levied at the full rate and later apportioned between the central and state governments. The total tax burden to the consumer is the same regardless of which components apply.
Australia and New Zealand
Australia levies GST at a flat 10% on most goods and services, with exemptions for basic food, some medical and educational services, and exports. New Zealand charges 15% GST on almost everything, with very few exemptions — one of the broadest GST bases in the world. Both countries use a single-rate system that is administratively simpler than India's multi-slab approach.
Reverse GST Calculation
When you have a GST-inclusive price and need to find the pre-GST amount (useful for accounting entries or expense reports), use: Net = Gross ÷ (1 + GST rate / 100). Never subtract the GST percentage directly from the gross — that gives the wrong answer. For example, removing 18% from ₹11,800 by multiplying by 0.18 gives ₹2,124, not the correct ₹1,800. The calculator above handles both directions correctly.
This calculator is for general estimates only. Consult a tax professional or refer to official government guidelines for compliance.