What is GST?

Goods and Services Tax or GST is considered being same or similar to Value Added Tax or VAT. Hence, the definition of GST would be similar or same. GST is the tax being imposed on services and goods on each phase of the chain of distribution. As an illustration, let me state that the factory or manufacturer would add it when the product is being sold it to a wholesaler. The wholesaler would add it when it would sell to a retailer, however, it could get the initial amount refunded.

Hence, in this level, the tax that is added would only apply to the net price difference between the wholesaler and the manufacturer. Such a similar rule is being applied in each of the next levels of the transaction. There would be only a single exemption wherein the end consumer could not have the tax refunded. This is because he would be the last in this distribution chain.

How GST Is Calculated?

  • Determining the net price (this is the price without including GST). Let us keep it at $50.
  • Finding the rate of GST. In our example, it would be 10%. In case they state it in percentages, one needs to divide it by 100. So it is 10/100 = 0.1.
  • For calculating the amount of the tax: multiplication of the net price by the rate of GST. $50 * 0.1 = $5.
  • For deciding the gross price: multiplication of the net price by the rate of GST (we would again receive $5) rate.
  • Finally, add it to the price exclusive of VAT. $50 + $5 = $55.