Tax Value Calculation When Price is Inclusive of GST

Tally Solutions |Updated on: May 13, 2022

In business, it is common to issue and receive invoices for goods or services where the price is inclusive of tax. Inclusive of tax means that the price quoted includes the value of tax. In such cases, a person has to do a back-calculation to arrive at the value of tax.

In this blog, we will discuss the simple formula for you to arrive at the value of tax when the price quoted for goods or services is inclusive of tax.

Formula to arrive at tax value when price is inclusive of tax

The tax value calculation when price is inclusive of GST is:

Tax amount = Value inclusive of tax X tax rate ÷ (100+ tax rate)

Let us discuss few examples to understand this:

Mr. Ram in Karnataka supplies a television to Mr. Shyam in Maharashtra. The television’s price inclusive of GST is Rs. 50,000. Mr. Ram wants to arrive at the value of tax.

Here, GST rate applicable to television is 18%. Since this is an interstate supply, type of tax applicable is IGST.

Let us arrive at the value of IGST in this case:

Value inclusive of tax= Rs. 50,000

Tax rate= 18

Hence, IGST amount= 50,000*18/118= Rs. 7627

Let us take another scenario.

Mr. Ram in Karnataka supplies a television to Mr. Rohan in Karnataka. The television’s price inclusive of GST is Rs. 20,000.

Here, the tax rate remains same, i.e. 18%. Since the supply is intrastate, the type of taxes applicable are CGST + SGST.

Hence, value inclusive of tax = Rs. 20,000

Tax rate = 18

Hence, tax amount = 20,000*18/118 = Rs. 3050.85

Hence, CGST amount = Rs. 3050.84/2 = Rs. 1525.42

Similarly, SGST amount = Rs. 3050.84/2 = Rs. 1525.42

Hence, this simple formula can be used by any person who wants to know the tax value calculation when price is inclusive of GST. Note that in Tax Invoice under GST, the GST amount has to be shown separately in the invoice, even if a product is sold at a price which is inclusive of taxes.