GST (goods and service tax)
• Started on 1st July 2017.
• It is a tax on value addition.
• This is a destination-based consumption tax, means the place of consumption
decides to which government (state or central or both) the tax goes.
• Seller collects the tax from buyer and deposits with the government/s
• Types of GST are
a. CGST -- Central GST goes to the central gov.
b. SGST -- State GST goes to the state gov.
c. UGST -- Union territory GST goes to the Union territory
d. IGST -- Integrated -GST goes to the central government
INTRA STATE -- If the goods movement is within the state
Then the tax goes to both state and central government
CGST (Central GST 50% /half ) goes to center
SGST (State GST 50% / half ) goes to states
INTER STATE -- If the goods movement is between the two states
Then it is a single tax goes to the central government
IGST ( Integrated GST 100% / full ) goes to center.
• Input tax credit (ITC)– (tax paid) The tax which is already paid while purchasing
the goods.
• This tax is applied on the purchase price (cost price).
Input GST credit = rate of GST X Cost price
• Output tax – (tax collected) The tax collected from the buyer
▪ This tax is applied on the selling price.
▪ Output GST =rate of GST X selling price
• The tax liability = output tax – input tax credit
▪ (sometimes tax rates are different for raw material and the finished
product)
= Tax on profit (if tax rates are same)
= GST payable to the government by the seller
• Consumer is an end user.
• For the consumer output GST and input tax credit = 0
(consumer does not have any claim on GST paid by him )
• Cost to Consumer for good/service = cost price + GST
• Total GST received by government on the sale of an article = (GST paid
by the consumer)
• When not mention it is inter-state transaction.
𝑮𝑺𝑻 𝒑𝒂𝒊𝒅 𝒃𝒚 𝒕𝒉𝒆 𝒔𝒆𝒍𝒍𝒆𝒓 𝒕𝒐 𝒕𝒉𝒆 𝒈𝒐𝒗𝒆𝒓𝒏𝒎𝒆𝒏𝒕
• Profit earned by the seller = 𝑹𝒂𝒕𝒆 𝒐𝒇 𝑮𝑺𝑻
• The input tax credit on IGST is to be adjusted against first on payment
of IGST or CGST and remainder on SGST or UGST.
• The export of goods or services is considered as a zero-rated
supply. GST will not be levied on export of any kind of goods
or services.
𝟏𝟎𝟎 + 𝑷%
𝑺𝑷 = 𝑪𝑷
𝟏𝟎𝟎
𝟏𝟎𝟎 − 𝑳%
𝑺𝑷 = 𝑪𝑷
𝟏𝟎𝟎
𝟏𝟎𝟎 − 𝒅%
𝑺𝑷 = 𝑴𝑷
𝟏𝟎𝟎
SP = CP + Profit
SP = CP – Loss
Example
1) The marked price of an article is Rs. 6000. A wholesaler sells it to a
dealer at 20% discount. The dealer further sells the article to a customer
at a discount of 10% on the marked price. If the rate of GST at each stage
is 18%, find
i) Cost price of an article to dealer.
ii) Input tax credit for dealer.
iii) Output GST for dealer.
iv) GST paid by dealer to the government.
v) The price paid by the customer for this article including GST.
vi) GST received by the government on the whole transaction
vii) Output GST for customer.
Wholesaler Dealer Customer
CP ----- 4800 5400
SP 4800 5400 ------
Profit 600
i) CP for dealer 6000 × 80% = 4800
ii) Input tax credit for dealer = GST paid by dealer
=4800 × 18% = 864
iii) Output GST for dealer = GST collected by dealer
=5400 × 18% = 972
iv) GST paid by the dealer to the government
=Output GST – Input tax credit
=972 – 864 = 108
Or = profit earned by dealer x GST%
= 600 x 18% = 108
v) Price paid by customer = CP to customer +GST
= 5400 + 5400x18% = 6372
vi) GST received by the government = GST paid by the
customer = 5400x18% = 972
vii) Output GST for customer = 0 (end user)
