Accurate GST calculation ensures you neither undercharge tax (which you would have to pay out of pocket) nor overcharge clients. In India, GST rates are broadly classified into 0%, 5%, 12%, 18%, and 28%.

The Core Formula for Taxable Value

Under Section 15 of the CGST Act: $$\text{Taxable Value} = \text{Item Gross Price} - \text{Trade Discounts / Rebates}$$

Note on Discounts: Any discount shown on the invoice face is deducted before calculating GST. Taxes cannot be levied on discounted amounts.

Formula for Intra-State Supplies (Same State)

When the supplier's state and place of supply are the same: $$\text{CGST Amount} = \text{Taxable Value} \times \left(\frac{\text{GST Rate}}{2}\right) \div 100$$ $$\text{SGST Amount} = \text{Taxable Value} \times \left(\frac{\text{GST Rate}}{2}\right) \div 100$$ $$\text{Total Invoice Amount} = \text{Taxable Value} + \text{CGST} + \text{SGST}$$

Formula for Inter-State Supplies (Different States)

When supplier state and customer state differ: $$\text{IGST Amount} = \text{Taxable Value} \times \left(\frac{\text{GST Rate}}{100}\right)$$ $$\text{Total Invoice Amount} = \text{Taxable Value} + \text{IGST}$$

Practical Example

Suppose you sell web development services worth ₹50,000 with a promotional discount of ₹5,000, under the standard 18% GST slab.
  • Gross Rate: ₹50,000
    • Discount: ₹5,000
      • Taxable Value: ₹45,000
        • If Intra-State (Same State): - CGST @ 9% = ₹4,050 - SGST @ 9% = ₹4,050 - Grand Total = ₹53,100
          • If Inter-State (Different State): - IGST @ 18% = ₹8,100 - Grand Total = ₹53,100

            You can test this automatically in real-time with our Free Invoice Generator.