GST Impact Formulae & Best Practices
Use this guide to understand how to calculate pricing adjustments after a GST rate change. These formulae help ensure accurate MRP updates across your supply chain and labeling operations.
Formulae
Base Price (Ex-GST): This is the product value before any GST is applied.
Formula:
Base Price = Current MRP / (1 + (Old GST / 100))
New MRP (Incl. New GST): This is the updated MRP after applying the new GST rate.
Formula:
New MRP = Base Price × (1 + (New GST / 100))
Absolute Change: This shows the difference in rupee terms between the new and old MRP.
Formula:
Change (₹) = New MRP - Current MRP
Percentage Change: This shows the percentage increase or decrease in MRP after the GST update.
Formula:
Change (%) = (Change (₹) / Current MRP) × 100
Use this when:
- After any GST Council rate change affecting your product category.
- Harmonizing MRPs across state inventories after a revision.
- Preparing new print runs for cartons or labels.
- Aligning with distributors and re-stickering MRPs during transitions.
Best Practices for Pricing Teams
- Lock Base Price logic: Maintain the ex-GST (base) price constant during tax changes; only revisit the base price if you intend to adjust margins.
- Round wisely: Use ₹0.50 or ₹1 for rounding to create clean shelf prices and simplify billing.
- Communicate proactively: Distribute circulars to distributors and stockists that include the effective date and a list of SKUs.
- Sync systems: Ensure that your ERP and CRM, along with price lists, are updated. Align the Price to Retail (PTR) and Price to Stockist (PTS) using your existing PTR and PTS calculators.
