Good morning internet, today we will discuss how taxes are calculated using Gross price, deductions, and net price..

Let’s start with what are the taxes applicable in India Currently there are 4 slabs 0% – Exempted goods like fresh and unbranded essentials 5% and 18% – where most of the products and services are covered 40% – for sin goods and ultra luxury items

For calculating the tax, the most common method is Forward calculation where price is without tax Let’s create sample data to understand this Company – Chicos haircare Product – Amla shampoo 250 gms Price – INR 250 per bottle Tax – 18% GST

Let’s break down this example A customer buys 7 bottles, so he has to pay INR 1750 /- . Here gross price is 1750 /- But the store owner decides to give him 100 as discount for being a loyal customer, so now he has to pay 1650 /- But wait still tax needs to be calculated, here the tax is calculated on 1650 /- which is (after discount) and not on 1750 /- (before discount) this is a common practise that most businesses follow. So tax is applied on 1650 /- which is 297/- and then Net total becomes 1947/- Out of which 1650 /- is the amount that retailer will get and 297/- is the tax that is paid to the government.

When we create an E-Invoice this breakup is required to be sent to the GST portal. Gross = 1750 Discount = 100 Taxable Amount = 1650 Tax = 297 Net = 1947

Santhosh