Question

A dealer purchased a music system from a manufacturing company for Rs. 25000 and sold it to a customer at a profit of 20%. If rate of GST is 18%, calculate
i) the amounts of input CGST and input SGST for the dealer
ii) the amount of GST payable by dealer to the Government.
iii) the amount that the consumer has to pay for the music system
[Assume that all transactions take place in the same state]

Answer 1

Hint: We have been given the cost and the profit of buying music system by a dealer. Using this we can find the selling price, various taxes on the system and the amount payable by the customer using certain formulas and get the respective answers.
Formulas to be used:
P = P% of CP
SP = CP + P
Where SP and CP are selling and cost price respectively and P is the profit.
GST mentioned in the question refers to the good and services tax, it is a combination of both CGST and SGST which are the taxes for central and state government respectively and are equal in amount. The rate of these taxes are half as that of the rate og GST.

Complete step-by-step answer:
It is given that the price of the music system is Rs. 25000.
🡪 The cost price (CP) = Rs. 25000
His percentage profit is 20%. So, the profit will be:
🡪Profit (P) = 20% of CP
   = 20% of 25000
  $ = \dfrac{{20}}{{100}} \times 25000 $
   = Rs. 5000
The selling price (SP) of the instrument is the sum of cost price and the profit dealer gained.
🡪 SP = CP + P
Substituting the values, we get:
🡪 SP = 25000 + 5000
🡪 SP = Rs. 3000
The rate of GST is given to be 18%.
i) The CGST and SGST input amounts for the dealer and their rates (R) are equal to half the rate for GST.
 $
  \Rightarrow R = \dfrac{1}{2} \times 18\% \\
  \Rightarrow R = 9\% \;
  $
These taxes are applied on the selling price of the commodity, the amount is given as:
 $
\Rightarrow A = \dfrac{9}{{100}} \times 30000 \;
  A = 2700 \;
  $
As the amount for both CGST and SGST are equal, we have:
🡪 CGST = SGST = A
🡪 CGST = SGST = Rs. 2700
Therefore, the amounts of input CGST and input SGST for the dealer are Rs. 2700 each.
ii) GST is the sum of both CGST and SGST
🡪 GST = CGST + SGST
🡪 GST = 2700 + 2700
🡪 GST = Rs. 5400
Therefore, the amount of GST payable by dealer to the Government is Rs. 5400
iii) The amount consumers need to pay is the GST over the selling price.
🡪 Amount = SP + GST
🡪 Amount = 30000 + 5400
🡪 Amount = Rs. 35400
Therefore, the amount that the consumer has to pay for the music system is Rs. 35400

Note: It is given in the question that we have to assume that all transactions take place in the same state because SGST which is for state government might vary from one state to another but in the same state there won’t be any change. Remember that the profit or loss percentage are to be calculated on CP while the rate for taxes are to be calculated on the SP because these taxes are paid by the customers to the government.