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Usually, the calculation of GST does not involve much trouble at all. However, what if you are especially interested in knowing the price of a product not including GST? Well, that is where a Reverse GST Calculator can prove very helpful.
Whether you're a small business owner trying to set up competitive pricing or just a smart shopper who wants to get a better grip on expenditures, knowing how online reverse calculate GST can help clear things up.
You can achieve this by reducing the amount overall in order to determine the amount before GST. In such a scenario, you are able to implement the more relevant decisions. For so many people in the modern world, it becomes very important to understand how pricing works, and that has to do with understanding this procedural system.
Reverse GST is a process of estimation of the initial amount before GST. Reverse GST determines the base amount (without GST) of a product from the total amount. This is useful for businesses, especially when prices in the establishment are quoted with the amount including GST and you are not clear about the cost before tax.
In most countries, all goods or services sold must carry GST. In a few cases, firms operating their finances might require comparing prices or knowing how much a product or service costs initially to the tax credit applied.
Price Analysis:Firms are sometimes required to make comparisons based on pre-tax prices when viewing suppliers or competitors. Reverse GST provides firms the opportunity for appropriate price analyses and comparisons.
Input Tax Credits:In some countries, business organizations are permitted to claim the input tax credit for the GST paid on their purchases. For this, they need to know the amount of GST and the price before the introduction of GST. Reverse calculation will make things easier in this regard.
To calculate reverse GST, you need information of:
Cost of product (without GST) = Total amount / (1 + GST rate)
Example:Here's an example to understand how to calculate reverse GST.
Let's say you buy an item for $120, which includes a 10% GST.
Original Cost = Total Amount / (1 + GST Rate)
Given:Substitute these values into the formula:
Original Cost = $120 / (1 + 0.10)
Original Cost = $120 / 1.10
Original Cost = $109.09
Therefore, the original cost of the item before the 10% GST was added is approximately $109.09.
Let's say you bought an item for $120, and this price already includes a 10% GST.
To calculate the original cost (before GST was applied), you can use the reverse GST formula:
Original Cost = Total Amount / (1 + GST Rate)
Given:
Total Amount = $120 (including GST)
GST Rate = 10% or 0.10 (in decimal form)
Substitute these values into the formula:
Original Cost = $120 / (1 + 0.10)
Original Cost = $120 / 1.10
Original Cost = $109.09
Therefore, the original cost of the item before the 10% GST was added is approximately $109.09.
This calculation helps in determining the initial price of the product before the GST was included in the total amount paid.
Retailers often need to calculate pre-GST prices to manage profit margins to deal with input tax credits. Online platforms also display prices with GST, so businesses might need reverse GST to handle backend financials more efficiently.
Finance and Accounting:Accountants and finance departments rely on reverse GST calculations for preparing accurate tax reports, auditing financial statements, and filing tax returns. Without knowing the base price, it’s impossible to calculate the correct GST remittances or refunds.
International Trade:Importers and exporters need to work with GST-inclusive and exclusive prices, especially when calculating duties and tax adjustments. Reverse GST calculations help ensure accurate cost analysis in different jurisdictions.
There are two easy ways to figure out the GST amount: you either add GST to the original price or remove GST from the total price.
Adding GST Method:Consider an example:
If a laptop costs $50,000 and GST is 18%.
just take the 18% of $50,000 to get the GST amount.
18% of $50,000 is 0.18 x $50,000 = $9,000.
So the GST amount is $9,000.
GST amount = (Net price × GST rate) / 100
Removing GST Method:If the total laptop price is $59,000 and GST is 18%.
We take the total $59,000 and remove 18% to get the original price.
To remove 18%, we divide the total by 0.18 (to remove the 18% that was added).
59,000 divided by 0.18 is $50,000.
So the original price was $50,000.
| Country | GST Rate |
|---|---|
| Australia | 10% |
| Bangladesh | 15% |
| Canada | 5% (with additional Harmonized Sales Tax (HST) ranging from 0% to 15% in some provinces) |
| China | 13% (with reduced rates of 9% and 6% for certain goods) |
| France | 20% (with reduced rates of 10%, 5.5%, and 2.1%) |
| Germany | 19% |
| India | Ranges from 0% to 28%, with most non-essential items falling under 12% and 18% |
| Indonesia | 11% |
| Japan | 10% |
| Mexico | 16% |
| Netherlands | 21% |
| New Zealand | 15% |
| Pakistan | 17% |
| Russia | 20% |
| Saudi Arabia | 15% |
| Singapore | 9% (increased from 8% as of January 2023) |
| South Africa | 15% |
| South Korea | 10% |
| Switzerland | 7.7% |
| Thailand | 7% (temporarily reduced from the standard rate of 10%) |
| United Kingdom | 20% |
| United Arab Emirates | 5% |