Can you help me understand how to calculate tax on MRP?

Yes you can calculate the TAX on MRP in BUSY by following these steps:
If you want to apply the tax on MRP in bill sundry follow below steps:
Step 1: Take a backup of your data then Go to administration menu then click on masters submenu
Step 2: Afterwards click on bill sundry and open the bill sundry master from modify or list then select bill sundry such as CGST,SGST and IGST and open all of them one by one
Step 3: Then select amount of bill sundry to be feed as percentage and then select it as total MRP of items and select it as inclusive or over and above as required and save the master
Step 4: If transactions already exist in that case we recommend you to copy this bill sundry as duplicate and do the changes as mentioned above
Step 5: Then go to transactions menu and click on voucher such as sale,purchase etc then click on add button to create a new invoice
Step 6: Specify the required details and such as series,voucher number ,purchase or sale type and party name etc
Step 7: Do the entry and after that apply the tax in bill sundry 
Step 8: make sure MRP is mentioned in item master or you are using MRP wise details or parameter wise feature along with MRP to apply tax on MRP
If you want to apply the tax on MRP at item lavel follow below steps:
Step 1: Go to administration menu then click on masters submenu
Step 2: Then open the sale and purchase type master from modify button
Step 3: Open the sale and purchase type such as IGST item wise,tax inclusive etc
Step 4: Select calculate tax on mrp option as Y to enable it and select tax on mrp as inclusive or over and above and save the master
Step 5: If transactions already exist in that case we recommend you to copy this sale and purchase type master as duplicate and do the changes as mentioned above
Step 6: Then go to transactions menu and click on voucher such as sale,purchase etc then click on add button to create a new invoice
Step 7: Specify the required details and such as series,voucher number ,purchase or sale type and party name etc
Step 8: Do the entry and after that apply the tax by pressing enter in amount field of each item