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Commercial Mathematics - Goods and Services Tax (GST)

Grade 10ICSE

Review the key concepts, formulae, and examples before starting your quiz.

🔑Concepts

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Goods and Services Tax (GST) is a destination-based, single indirect tax levied on the supply of goods and services. Visualize a supply chain where the tax is collected at each stage of value addition, but the final consumer bears the total tax burden.

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Intra-state movement occurs when the buyer and seller are located within the same state or Union Territory. In this case, GST is divided into two equal parts: Central GST (CGSTCGST) and State GST (SGSTSGST). Imagine a split receipt where 50%50\% of the tax goes to the Central Government and 50%50\% goes to the State Government.

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Inter-state movement occurs when the buyer and seller are in different states. In this transaction, only Integrated GST (IGSTIGST) is levied, which is collected by the Central Government. Visualize a bridge connecting two different states on a map, with a single tax flow across the border.

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Input Tax Credit (ITC) is the process where a dealer can claim a credit for the tax paid on purchases (InputTaxInput Tax) while paying the tax collected on sales (OutputTaxOutput Tax). Imagine a balance sheet where the tax already paid to a supplier is subtracted from the tax collected from a customer to find the net liability.

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Taxable Value is the actual price at which goods are sold after deducting any trade discounts from the Marked Price (MPMP). Visualize a price tag where the original price is struck through, and the discount is subtracted to arrive at the base price used for GST calculations.

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GST is a 'Value Added Tax' because at each stage of the supply chain, the tax is effectively paid only on the 'Value Added' by the dealer (Profit). Visualize a block representing the dealer's purchase price, and a smaller block on top representing their profit; the net GST is calculated on that smaller profit block.

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The Total Amount or Bill Amount is the sum of the Taxable Value and the calculated GST (CGST+SGSTCGST + SGST or IGSTIGST). Picture a final invoice where the subtotal is listed first, followed by the tax components, and finally the grand total at the bottom.

📐Formulae

Taxable Value=Marked Price−Discount\text{Taxable Value} = \text{Marked Price} - \text{Discount}

CGST Amount=Rate of CGST100×Taxable Value\text{CGST Amount} = \frac{\text{Rate of CGST}}{100} \times \text{Taxable Value}

SGST Amount=Rate of SGST100×Taxable Value\text{SGST Amount} = \frac{\text{Rate of SGST}}{100} \times \text{Taxable Value}

IGST Amount=Rate of IGST100×Taxable Value\text{IGST Amount} = \frac{\text{Rate of IGST}}{100} \times \text{Taxable Value}

Net GST Payable=Output Tax−Input Tax\text{Net GST Payable} = \text{Output Tax} - \text{Input Tax}

Total Bill Amount=Taxable Value+GST Amount\text{Total Bill Amount} = \text{Taxable Value} + \text{GST Amount}

Rate of CGST=Rate of SGST=12×Rate of GST\text{Rate of CGST} = \text{Rate of SGST} = \frac{1}{2} \times \text{Rate of GST}

💡Examples

Problem 1:

A shopkeeper in Delhi buys an article for Rs.8,000Rs. 8,000 from a wholesaler in Delhi. He sells it to a consumer in Delhi at a profit of 25%25\%. If the GST rate is 18%18\%, calculate: (i) The total GST paid by the shopkeeper to the Government, (ii) The total amount paid by the consumer.

Solution:

  1. Cost Price (CP) for shopkeeper = Rs.8,000Rs. 8,000
  2. Profit = 25% of 8,000=25100×8,000=Rs.2,00025\% \text{ of } 8,000 = \frac{25}{100} \times 8,000 = Rs. 2,000
  3. Selling Price (SP) for shopkeeper = 8,000+2,000=Rs.10,0008,000 + 2,000 = Rs. 10,000
  4. Since it is an intra-state transaction (Delhi to Delhi):
    • Input Tax (paid on purchase) = 18% of 8,000=Rs.1,44018\% \text{ of } 8,000 = Rs. 1,440
    • Output Tax (collected on sale) = 18% of 10,000=Rs.1,80018\% \text{ of } 10,000 = Rs. 1,800
  5. (i) Net GST paid by shopkeeper = Output Tax−Input Tax=1,800−1,440=Rs.360\text{Output Tax} - \text{Input Tax} = 1,800 - 1,440 = Rs. 360
  6. (ii) Total amount paid by consumer = SP+GST=10,000+1,800=Rs.11,800\text{SP} + \text{GST} = 10,000 + 1,800 = Rs. 11,800

Explanation:

In this intra-state case, the shopkeeper pays tax on the value addition (profit). The consumer pays the final selling price plus the full GST amount.

Problem 2:

A dealer in Punjab sells goods worth Rs.20,000Rs. 20,000 to a dealer in Haryana. The GST rate is 12%12\%. The dealer in Haryana then sells the same goods to a consumer in Haryana at a profit of Rs.5,000Rs. 5,000. Find the IGST and the final amount paid by the consumer.

Solution:

  1. Transaction 1 (Inter-state: Punjab to Haryana):
    • Taxable Value = Rs.20,000Rs. 20,000
    • IGST = 12% of 20,000=12100×20,000=Rs.2,40012\% \text{ of } 20,000 = \frac{12}{100} \times 20,000 = Rs. 2,400
  2. Transaction 2 (Intra-state: Haryana to Haryana):
    • CP for Haryana dealer = Rs.20,000Rs. 20,000
    • Profit = Rs.5,000Rs. 5,000
    • SP for consumer = 20,000+5,000=Rs.25,00020,000 + 5,000 = Rs. 25,000
    • GST on final sale = 12% of 25,000=Rs.3,00012\% \text{ of } 25,000 = Rs. 3,000
    • CGST = Rs.1,500Rs. 1,500 and SGST = Rs.1,500Rs. 1,500
  3. Final amount paid by consumer = 25,000+3,000=Rs.28,00025,000 + 3,000 = Rs. 28,000

Explanation:

The first movement is inter-state, so IGST applies. The second movement is intra-state, so CGST and SGST apply. The consumer pays the final SP plus the combined GST.