Question

A cycle manufacturer in Ghaziabad (UP) sold a cycle to a dealer in Agra (UP) for Rs. \[16000\] . This cycle was then sold to a dealer in Ujjain (M.P) for Rs. \[17500\] . If the GST rate for the cycle is \[12\% \] , Calculate:
A) The net GST payable at Agra
B) Input Tax Credit for the dealer in Ujjain.

Answer 1

Hint: We will solve this problem by calculation the GST amount which is charged upon the selling price or in other words, the price at which any item is sold. If the GST % is \[r\% \] then the GST amount will be:
\[{\text{GST amount}} = \dfrac{r}{{100}} \times {\text{Selling price}}\]

Complete step-by-step answer:
Step 1: The selling price of the cycle which was sold by the manufacturer in Ghaziabad to a dealer in Agra is Rs. \[16000\]
Selling Price (From Ghaziabad to Agra) = \[16000\]
GST %= \[12\% \] (\[\because \]given in the question)
Step 2: For calculating the GST amount when the cycle was sold to a dealer in Agra from Ghaziabad, we will use the GST amount formula which is as below:
\[{\text{GST amount}} = \dfrac{r}{{100}} \times {\text{Selling price}}\]
By substituting the values of selling price and GST rate in the equation \[{\text{GST amount}} = \dfrac{r}{{100}} \times {\text{Selling price}}\] we get:
\[ \Rightarrow {\text{GST amount}} = \dfrac{{12}}{{100}} \times 16000\] ……… (1)
Now, by doing simple division and multiplication in the RHS side, we get:
\[ \Rightarrow {\text{GST amount}} = {\text{Rs}}.1920\]
Step 3: The selling price of the cycle which was sold by the manufacturer in Agra to a dealer in Ujjain is Rs. \[17500\]
Similarly, for calculating Input Tax Credit for the dealer in Ujjain we will again repeat the same steps as above in 1 and 2:
For calculating the GST amount when the cycle was sold to a dealer in Ujjain from Agra, we will use the GST amount formula which is as below:
\[{\text{GST amount}} = \dfrac{r}{{100}} \times {\text{Selling price}}\]
By substituting the values of selling price and GST rate in the equation \[{\text{GST amount}} = \dfrac{r}{{100}} \times {\text{Selling price}}\] we get:
\[ \Rightarrow {\text{GST amount}} = \dfrac{{12}}{{100}} \times 17500\] ……… (2)
Now, by doing simple division and multiplication in the RHS side, we get:
\[ \Rightarrow {\text{GST amount}} = {\text{Rs}}.2100\]
Step 4: Now the net GST payable at Agra we will subtract the Input Tax Credit for the dealer in Agra from the Input Tax Credit for the dealer in Ujjain:
\[ \Rightarrow \]Net GST payable at Agra\[ = \] Input Tax Credit for the dealer in Ujjain\[ - \]Input Tax Credit for the dealer in Agra …….. (3)
Now by substituting the values of Input Tax Credit for the dealer in Ujjain which is \[{\text{Rs}}.2100\], and the Input Tax Credit for the dealer in Agra which is \[1920\] in the above equation (3), we get:
\[{\text{Net GST payable at Agra}} = 2100 - 1920\]
Now, by subtracting the terms on the RHS side we get:
\[{\text{Net GST payable at Agra}} = {\text{Rs}}.180\].
Answer/Conclusion:
(i) \[{\text{Net GST payable at Agra}} = {\text{Rs}}.180\]
(ii) Input Tax Credit for the dealer in Ujjain is \[{\text{Rs}}.2100\].

Note: In these types of questions students should remember that the GST amount of any item is calculated on the Selling price of that item.
You should also remember one thing about GST (Goods and Services Tax) that the state where the items or goods are destined or arriving, that state will get the GST revenue. There are two types of GST mentioned as below:
Inter-State GST- When the items or goods coming from one state to other then Inter-State GST will be applied also known as IGST.
Intra-State GST- When the items or goods are supplied within the same state then Intra-State GST will be applied which is known as CGST (Central GST) and SGST (State GST).