How GST is calculated: adding it and taking it out of a price

Nearly every GST question comes down to one thing: does the price you have already include GST? The answer decides which of two formulas you use, and using the wrong one is the most common GST mistake in small shops.

When the price does not include GST

This is the usual case when you buy from a wholesaler or quote a price "plus GST". Work out the tax on the price and add it.

GST = price × rate ÷ 100
Total = price + GST

Example: a chair at ₹1,000 plus 18% GST. The GST is 1,000 × 18 ÷ 100 = ₹180, so the customer pays ₹1,180.

When the price already includes GST

This is the usual case for a shop's selling price, and every packaged product's MRP. The tax is already inside the number, so you take it out.

GST = price × rate ÷ (100 + rate)
Price before GST = price − GST

Example: the same chair with ₹1,180 on the tag, including 18% GST. The GST is 1,180 × 18 ÷ 118 = ₹180, which leaves ₹1,000 before tax.

The common mistake: taking 18% of ₹1,180 gives ₹212.40, which is ₹32.40 too much. 18% was charged on the price before tax, not on the total, so you cannot take 18% of the total to get it back.

On a phone calculator, the quickest way is to multiply or divide by these numbers:

The current GST rates

From 22 September 2025, India moved to a simpler structure. The old 12% and 28% rates were removed, and most goods and services now fall under one of these:

• Nil (0%): items that are exempt, such as many unprocessed foods.
• 5%: the lower rate for many everyday goods and services.
• 18%: the standard rate, which covers most goods and services.
• 40%: a higher rate for certain luxury and "sin" goods.

A few items have their own special rates, such as 3% on gold and silver. If you are looking at an old invoice or an old price list, it may still show 12% or 28% from before the change.

The rate depends on what you are selling, identified by its HSN code for goods or SAC code for services, not on the type of shop. If you are unsure of your item's rate, check the notifications on the CBIC website or ask your accountant. Don't copy the rate from a competitor's bill.

CGST, SGST and IGST

The rate stays the same, but the tax is shown differently depending on where the customer is:

• Sale within your state: the tax is split equally into CGST and SGST. On the ₹1,000 chair at 18%, that is ₹90 CGST and ₹90 SGST. In a union territory without its own legislature, UTGST takes the place of SGST.
• Sale to another state: the whole amount is IGST, so ₹180 IGST.

The customer pays the same ₹1,180 either way. The split only decides which government receives the tax.

A worked example with more than one rate

A bill often mixes rates, so calculate each line separately and never apply one rate to the bill total. Suppose a customer buys two items whose prices include GST:

This guide explains the arithmetic and gives general information only. It isn't tax advice. Rates are set by government notification and can change, so confirm yours at cbic.gov.in or with a chartered accountant.