As a business owner and taxpayer, it is likely you are familiar with GST calculation on the sale and purchase of goods and services. What’s also important is that you understand the reverse calculation of GST. This will enable you to ensure that GST charges are accurate and keep business compliant. It will also benefit you during returns filing and while making ITC claims. Here we take a look at the GST reverse calculation formula, how it works, and how to use a reverse GST calculator to help you determine the original price of a good/service before GST was added to it.

Note: Reverse GST should not be mistaken with Reverse Charge Mechanism which is a key feature of GST system in India.

What is reverse calculation of GST?

Let us understand what is reverse calculation of GST. During sales, sellers charge GST on the sale of goods. Based on the GST rate structure and the nature of goods, the GST charge can range from 0% to 28% of the value of goods. As a buyer however, you only get to know the final price, inclusive of GST. As such, if you want to know the base or original price of the good/service you are purchasing, reverse calculation of GST is required.

You can use an online reverse GST calculator to find the base price or work the math out manually with the GST reverse calculation formula.

In both cases, the calculation will help you in accounting and tax filing by recording the actual price of the product and the tax already paid on it. It therefore enables businesses to financial planning by helping them to forecast their tax liabilities accurately. It also helps businesses to design an appropriate pricing strategy.

What is a Reverse GST calculator?

A reverse GST calculator is a tool to determine the base or original price of a good or service before taxes. The calculator makes it easy to reverse the calculation of GST charged, making it easy for anyone to quickly understand the actual cost of the product without tax.

When prices are quoted ‘inclusive of GST’, a reverse GST calculator will allow you to back-calculate from the gross the amount that is taxed as GST.

GST inclusive meaning:

This refers to the final amount of the good/service after adding GST charges to the base price of the good. For instance, if the cost of a good/service is ₹100, including GST, then the original price of the good/service is ₹84.75 without GST charges (i.e., GST of 18%).

GST exclusive meaning:

This refers to the base price of the good/service before adding GST charges to it. For instance, if the price of a good/service is ₹100, excluding GST, then the final invoice amount will be ₹118 with GST charges (i.e., 18% GST).

How to use an online reverse GST calculator?

You can browse on the internet for a reliable online reverse GST calculator. The formula for reverse GST charges is already pre-built in the calculator, saving you the hassle of manual calculations.

To use a standard reverse GST calculator, follow the steps below:

• Select the GST rate structure: This will vary based on the good/service. Standard GST rate slabs are: 0% (NIL), 3%, 5%, 12%, 18% and 25%
• Enter the price of goods: Ensure you select whether price is inclusive or exclusive of GST. To calculate reverse GST charges, always select ‘GST inclusive’.
• Click ‘Calculate’ for results: Click the ‘Calculate’ or ‘Submit’ button to get response. Depending on the tool being used, you can check the split.

For instance, in our previous example, when price inclusive of GST is ₹100, the split will be:

• Base price = ₹84.75
• GST charged = ₹15.25
• CGST charged = ₹7.63
• SGST/UTGST = ₹7.63

In the following sections, we will take a closer look at how to calculate reverse GST amount.

Note: For intra-state supply of goods and services, total GST is split equally between the State and Central governments, i.e., CGST and SGST/UTGST.

What is the GST reverse calculation formula?

Let us now take a look at the GST reverse calculation formula to determine the original price of a product before GST was added to it.

Formula to calculate reverse GST:

Base price = Final price / (1 + (GST% / 100)

Where:

• Base price = The original price of the goods/service before GST was added (excluding GST)
• Final price = The price paid by the customer including GST charges
• GST% = This is the rate of GST charged on the product

If you know the GST rate and either the base or final price, you can use the GST reverse calculation formula to arrive at the product price, either including or excluding GST.

Note: Apart from NIL GST items, there are also GST exempted items that do not incur any GST charges.

How to calculate reverse GST amount?

We have understood the fundamentals of reverse calculation of GST and the standard formula for calculating reverse GST. Let us now use the formula to understand GST reverse calculation.

Regular GST calculation:

• Base price of goods = ₹500
• GST rate % applicable = 12%
• Final price of goods = ₹500 + (12% x ₹500) = ₹500 + (0.12 x ₹500) = ₹500 + ₹60 = ₹560
• GST amount = ₹60
• CGST and SGST/UTGST split = ₹30 (CGST) + ₹30 (SGST/UTGST) or ₹60 (IGST)

Also read: GST types in India – Difference between IGST, CGST and SGST/UTGST

Reverse GST calculation:

• Final price of goods = ₹500
• GST rate % applicable = 5%

Reverse GST to calculate base price (with formula):

= Final price / (1 + (GST% / 100)

= ₹500 / (1 + (5% / 100) = ₹500 / (1 + 0.05)

= ₹500 / 1.05 = ₹476.19 or ₹476.20 (round off)

GST charged:

= Final price – Base price = ₹500 – ₹476.20 = ₹23.80

GST split:

IGST = ₹23.80

CGST and SGST/UTGST = ₹11.90 (CGST) and ₹11.90 (SGST)

As such, with reverse GST calculation we know, for a good priced at ₹500, the base price is ₹476.20 (excluding GST) and the total GST charged is ₹23.80.

Why is reverse calculation of GST important?

GST reverse calculation is important to ensure that you are generating correct invoices or GST e-Invoices. It also helps to claim input tax credits accurately and maintain transparency in pricing.

Moreover, when goods are returned or service quality is not maintained, and sellers issue GST credit notes, it’s beneficial to understand and calculate reverse GST. That is, it enables business to follow the set GST rules effectively and accurately report their tax obligations.

Listed below are the reasons why reverse calculation of GST is important:

• Reverse GST calculations enables businesses to accurately price their goods and services, to keep it fair and competitive without tax components
• It also enables businesses to stay compliant of GST rules (and avoid reporting errors and penalties) by computing taxes based on original prices
• Helps businesses in budgeting and financial planning, by calculating actual costs and profits before taxes

It’s important from a business perspective therefore that you understand how reverse calculation of GST is done. It will help you to avoid GST related legal complexities, stay transparent in tax reporting, and adopt a fair, competitive pricing strategy for your business.

FAQs

How do you calculate reverse GST?

You can calculate reverse GST by using the simple formula: Base price = Final price / (1 + (GST% / 100)

How do I remove 18% GST from my total amount?

You can use the reverse GST formula to remove the GST rate percentage from the final price and arrive at the base price before taxes, i.e., GST exclusive price.

The formula for reverse GST calculation is: Base price = Final price / (1 + (GST% / 100)

So, if the final price of a good is ₹1000 and GST is charged at 18%, then the base price before GST will be:  ₹1000 / (1 + 0.18) = ₹1000 / 1.18 = ₹847.46 (round off) and the total GST charged is ₹152.54.

How do you work backwards from GST?

To do back-calculation for GST, use the formula for reverse GST calculation: i.e., Base price = Final price / (1 + (GST% / 100)

You can input the relevant numbers and do the back calculation accordingly.

*This article is for reference only. For further details, please visit the GST portal website or consult with a GST Practitioner, CA or tax consultant for professional advice.

Author: Sohini Banerjee

Sohini is a seasoned content writer with 12 years’ experience in developing marketing and business content across multiple formats. At Tata nexarc, she leverages her skills in crafting curated content on the Indian MSME sector, steel procurement, and logistics. In her personal time, she enjoys reading fiction and being up-to-date on trends in digital marketing and the Indian business ecosystem.