GST is a destination-based taxation system, levied on the consumption of goods and services. It is levied at multiple stages of production as well as distribution, placing it as a comprehensive indirect tax depending on pure value addition at every stage.
GST is calculated based on the net price of a product. The applicable tax slab for a particular product or service is determined based on certain regulations issued by the Government of India.
- A total of Rs.412,000+ crore was collected as Goods and Services Tax during the financial year 2019-2020 (January to October.)
Although not intrinsically related, term loans play a major role in the Indian economy just as GST. These are advances provided by the government or by public or private sector financial institutions to entities, individuals or companies, based on agreements mandating a term of repayment.
For a business, GST and term loans are significant contributors and regulators of its overall operations. It is vital for business owners to plan their finances accurately by computing their tax liabilities as well as those related to their finances.
You can use a GST or term loan calculator offered for complimentary usage by numerous leading financiers and others to do the same. But before that, it is vital to have a proper idea about either for comprehensive and beneficial usage.
Understanding online tax calculators
GST is calculated by multiplying the taxable sum by the applicable tax rate. It determines the total tax liability, where one half of the applicable tax rate will be charged by the central government and the other by the respective state government (or Union Territory.)
Online GST calculators determine the tax liability by calculating the taxable income, income exempted from GST, and applicable tax slab.
- If a taxpayer pays for a product or a service that already includes GST charges in the total cost, the tax liability will be exempted as GST excluded amount. It is calculated as – GST excluded amount = GST including amount / (1+GST rate/100).
Different GST tax slabs
The tax liability under Goods and Services Tax varies depending on the product or service on offer. It is important for everyone to understand the different tax slab before using a GST calculator for wholesalers and retailers.
GST tax bracket ranges from 0% to 28% depending on whether a particular product (or service) is considered as necessity or luxury. Luxury items usually attract a higher tax liability, whereas essential and commonly used items are taxed less.
Here is a breakdown of different tax slabs –
- GST of 5% is applicable to household goods, including cooking oil, spices, tea and coffee, and sweets. Lifesaving drugs and coal is also covered under this particular slab.
- Computers and its peripherals, processed foods, etc. are included under a tax slab of 12% under the GST regime.
- GST of 18% is applicable to toiletries (hair oil, toothpaste, soap, etc.), capital goods and industrial intermediaries.
- Any luxury item, including consumer durables, passenger and premium cars, motorcycles, cigarettes, and aerated drinks, etc. are applicable on a GST tax slab of 28%.
Note that CESS is applicable to a handful of certain types of goods, such as tobacco, chewing tobacco, etc.
The revised GST rate had a significant impact on small and medium scale businesses; by combining several indirect taxes into one umbrella, businesses have access to a transparent system that eliminates repeat taxation, variable tax slab for inter-state transportation and retailing of goods, etc.
GST calculation for reverse charge
The calculation for a reverse charge under the GST regime follows a similar formula. GST applicable for the reverse rate is also determined based on the applicable tax slab. The CGST and SGST division will be half of the taxable amount.
It is an important aspect of GST that every SME or MSME should know to ensure they fulfill their tax obligations in time.
GST’s effect on the lending industry
Financial and lending sectors were not significantly affected by the implementation of GST. The service tax levied on credits has been standardized at a flat 18%; there was no other significant change that marked the enactment of GST in the financial sector.
Prospective borrowers can easily finance their expenses without worrying about any additional cost under the new taxation system. One can use a term loan calculator to determine their financial requirement, payable interest rate, preferred loan tenor, etc. before availing a particular credit.
What is a term loan EMI calculator?
A term loan calculator is an online tool that allows borrowers to determine the total payable amount against their credit. Prospective borrowers only have to enter the loan amount, select applicable loan tenor and rate of interest, and the calculator will display the results as EMIs.
Such online calculators are ideal for comparing amongst various term loans, including unsecured credits like business loans. Customers can find the best balance between payable EMIs and the total cost of the credit to select their lender accordingly.
There are various financial institutions, including NBFCs like Bajaj Finserv, that offer such credits to eligible applicants. Moreover, this NBFC also provides pre-approved offers to existing customers, which makes the application process quick and hassle-free.
The understanding term loan and GST calculators are essential for companies across the nation, as it allows the business to comply and benefit from the updated regulation.
These online tools offer significant convenience to taxpayers, helping them determine their tax liability accurately without spending substantial time.