How to Calculate GST: Formula, Examples and Inclusive Prices (2026)

Most people calculate GST in their head every day: 18% on ₹1,000 is ₹180, so the customer pays ₹1,180. That part is easy. The trouble starts with everything around it: a price that already includes GST, a bill with items at two different rates, a discount given at the counter, or a customer from another state. Each one has a right way and a common wrong way, and the wrong way ends up printed on an invoice and filed in a return.

This guide gives you the two formulas that cover almost every case, then works through real examples in rupees at the current GST rates: adding GST, removing GST from an inclusive price, splitting it into CGST and SGST, mixed-rate bills, discounts and rounding. It finishes with a short note on input tax credit and the mistakes that cause trouble at return time.

The two GST formulas

Everything in GST arithmetic comes back to two questions: do you have the price before tax, or the price after tax?

The last two rows are the "reverse GST" calculation, and they are where most mistakes happen. The next two sections take each direction in turn.

How to add GST to a price

This is the normal case for a shop that keeps its prices before tax. Multiply the taxable value by the rate and divide by 100, then add the result.

A quick way to get the total in one step is to multiply by a factor: 1.05 for 5%, 1.18 for 18%, 1.40 for 40%. ₹2,000 × 1.05 = ₹2,100.

The taxable value is the price of the goods or services as charged, after any discount given on the invoice (more on that below) and including charges such as packing that form part of the sale. It never includes the GST itself.

How to remove GST from an inclusive price

Many shops quote a single price that already includes GST, often the MRP. To issue a proper tax invoice you still need to show the taxable value and the GST separately. That means working backwards.

The rule: divide by (100 + rate) and multiply by 100. Do not simply take the rate off the inclusive price.

Look at the ₹1,180 example again. If you take 18% of ₹1,180, you get ₹212.40, and the taxable value would come out at ₹967.60. Both are wrong. The tax on ₹1,000 is ₹180, so that is the only figure that adds back to ₹1,180. The 18% applies to the price before tax, not to the price after it.

A shortcut that always works: the GST share of an inclusive price is rate ÷ (100 + rate).

So "18% GST" means 15.25% of an inclusive price is tax, not 18%.

Current GST rates in 2026

GST rates were reset on 22 September 2025, in the reform widely called GST 2.0. The four main slabs of 5%, 12%, 18% and 28% gave way to a simpler structure:

Most items that were at 12% moved down to 5%, and most items at 28% moved down to 18%, with a smaller group moved up to 40%. A few special rates sit outside the main slabs, such as 3% for gold, silver and jewellery and 0.25% for rough diamonds.

What this means for your calculations:

• If a calculator, template or old price list still offers 12% or 28%, check the item before you use it. For most goods those rates are out of date.
• The rate depends on the exact item and its HSN code, not on the shop. Our guide to what an HSN code is explains how to find the right one.
• The formulas do not change. Only the rate you plug in does.

How to split GST into CGST, SGST and IGST

Once you have the GST amount, the place of supply decides how it is shown.

Within your state (intra-state): half goes to the Centre as CGST and half to your state as SGST (or UTGST in a union territory).

To another state (inter-state): the whole amount is IGST.

The customer pays the same total either way. What changes is which government gets the money, and which lines appear on the invoice. Charging CGST and SGST on a sale that should have been IGST, or the other way round, is one of the costlier mistakes, because the wrong tax is not simply moved across; it is usually paid again under the right head and the other claimed back. Our guide to the difference between CGST, SGST and IGST covers place of supply in detail.

A bill with items at different rates

Real bills mix rates. Tax is calculated line by line, at each item's own rate, and then added up. Never average the rates or apply one rate to the whole bill.

Example: a shop in Tamil Nadu sells to a customer in Tamil Nadu.

The bill comes to ₹3,676.00 + ₹324.20 = ₹4,000.20.

Notice that the overall tax is about 8.8% of the taxable value. That figure means nothing on its own; it is just the result of mixing a 5% item with an 18% item. If you had applied 18% to the whole bill you would have overcharged the customer by ₹337.48 on the rice.

How a discount changes GST

A discount given on the invoice at the time of the sale comes off the taxable value before GST is calculated. This follows from Section 15(3)(a) of the CGST Act: the value of supply does not include a discount given before or at the time of supply, as long as it is recorded on the invoice.

Taking the discount off after tax charges the customer GST on ₹100 they never paid: ₹18 too much on this one bill, repeated on every discounted bill.

A discount on a mixed-rate bill

When a single discount is given on the whole bill, it has to be shared across the lines in proportion to their value, so each line's tax drops by the right amount. Take the bill above with a ₹100 discount:

The rice carries 70.62% of the bill's value, so it takes 70.62% of the discount. The customer pays ₹3,576.00 + ₹315.38 = ₹3,891.38. Putting the whole ₹100 against one line would give a different tax figure, because the two lines are taxed at different rates.

Discounts given after the sale, such as a year-end volume rebate, are handled differently: they reduce the value only if they were agreed in advance and are linked to specific invoices, and they go through a credit note. Ask your accountant before treating those as a price cut.

Rounding: paise, rupees and the round-off line

Three practical rules keep the arithmetic clean:

1. Calculate tax on each line to the paisa. ₹100 at 18% inclusive gives ₹15.25 of tax, not ₹15. Small differences add up across hundreds of bills.
2. Round the invoice total, if you want to, with a visible line. A bill of ₹4,000.20 can be shown as "Round off −₹0.20, Total ₹4,000". The tax lines above stay exact.
3. Make sure the total you collect is the total on the bill. If your UPI QR code asks for ₹4,000.20, the invoice should say ₹4,000.20, not ₹4,000. A mismatch confuses the customer and your own reconciliation.

When you pay the tax through your return, the amounts are rounded to the nearest rupee, as Section 170 of the CGST Act provides. That rounding happens at the return level, on the totals. It is not a reason to round each invoice line.

What you actually pay: input tax credit in brief

The GST you charge customers is your output tax. The GST you paid on stock and business purchases is your input tax. If you are a regular GST-registered business, you pay the difference:

GST payable = Output tax − Eligible input tax credit

You can claim the ₹9,000 only if all of these hold:

• You have a valid tax invoice from the supplier.
• You have received the goods or services.
• The supplier has filed their return, so the invoice appears in your GSTR-2B.
• You pay the supplier within 180 days of the invoice date. If you do not, the credit has to be reversed with interest until you pay.

Businesses in the composition scheme work differently: they pay a small fixed percentage of turnover, cannot charge GST on their bills and cannot claim input tax credit. Whether you need to register at all depends on your turnover; our guide to the GST registration limit explains the thresholds.

Common GST calculation mistakes

Taking the rate off an inclusive price. 18% of ₹1,180 is not the tax in ₹1,180. Use 18 ÷ 118.

Deducting the discount after tax. A discount shown on the invoice reduces the taxable value first. Doing it the other way charges tax on money the customer did not pay.

Using one rate for the whole bill. Every line is taxed at its own rate. A grocery bill can easily mix 0%, 5% and 18% items.

Using old slabs. Items that were at 12% or 28% before 22 September 2025 have mostly moved. A template or calculator that still defaults to them will give the wrong answer.

The wrong split. CGST plus SGST within the state, IGST across states. The deciding factor is the place of supply, not where the customer lives in general.

Rounding each line to the rupee. Keep line tax to the paisa and round once, at the total, if at all.

Calculating GST in BillZap

Doing this arithmetic by hand for every customer is slow and easy to get wrong at a busy counter. BillZap is a free GST billing app for Android that does it for you as you add items:

• It works out CGST and SGST or IGST from the place of supply you choose.
• It suggests a GST rate from the item name, which you confirm and save once against the item.
• A bill discount comes off before GST and is shared across the lines in proportion to their value, exactly as in the example above.
• Tax is calculated to the paisa, and the total on the bill is the same amount the UPI QR code asks for.
• You can share the bill as a PDF on WhatsApp, and export a GSTR-1 ready summary for your accountant.

It works fully offline, needs no sign-up and has no paid tier. Prices are entered before tax, so for MRP-inclusive items, work out the taxable value with the formula above when you set up the item. To see how a full bill comes together, read our step-by-step guide on how to make a GST bill on your phone, and our GST invoice format guide for what every bill must show.

FAQ: calculating GST

The bottom line

GST calculation comes down to two formulas: multiply by the rate to add tax, and divide by (100 + rate) to take it out. The rest is applying them in the right order: line by line at each item's current rate, discount before tax, CGST and SGST within the state or IGST across it, and rounding only at the end.

Get that order right once and every bill is correct. If you would rather have an app hold the rates and do the sums at the counter, BillZap is free on Google Play. It works offline with no sign-up.

This guide explains GST arithmetic in plain language and is not tax advice. The rate for an item depends on its exact classification, and the treatment of discounts, credit and place of supply can depend on the facts of a sale; confirm with your chartered accountant before relying on a figure for a filing.