Question

A is a dealer in Banaras (U.P.). He supplies goods/ services worth Rs 8,000 to a dealer B in Agra (U.P.). Dealer B, in turn, supplies the same goods and services to dealer C in Patna (Bihar) at a profit of Rs 1,200. Find the input and output taxes for the dealer C under the GST system, if the rate of GST is \[18\%\] and C does not sell his goods/ services further.

Answer 1

Hint:
Here, we will find the input and output tax for dealer C. We will find the amount of tax for the dealer A and for dealer B using the given information. Then by using the cost price and selling price for dealer C we will find the amount of tax. Tax is defined as an amount that has to be paid while purchasing an item.

Formula Used:
We will use the following formula:
1) The amount paid as tax is given by the rate of tax multiplied by the cost price.
2) Selling price is given by the formula \[SP = CP + {\rm{Profit}}\], where \[SP\] is the selling price and \[CP\] is the cost price.

Complete Step by Step Solution:
We are given that dealer A supplies goods/services worth Rs 8,000 to a dealer B.
So, the selling price for dealer A is Rs 8,000 and the cost price for dealer B is Rs8,000.
Both the dealers are in the U.P., so the transaction is between intra state transactions.
So, the transaction has to be levied with CGST tax which is shared along with the SGST tax.
So, the rate of GST \[18\%\] is divided into 2 equal halves that \[9\%\] has to be levied to CGST and 9% has to be levied to SGST.
Thus, the amount paid as taxes for Dealer B is given by rate of tax multiplied by the cost price.
We will first find the amount paid as CGST.
The amount paid as CGST \[ = 9\% \] of 8000
\[ \Rightarrow \] The amount paid as CGST \[ = \dfrac{9}{{100}} \times 8000\]
Multiplying the terms, we get
\[ \Rightarrow \] The amount paid as CGST \[ = {\rm{Rs}}.720\]
Now we will first find the amount paid as SGST.
The amount paid as SGST \[ = 9\% \] of 8000
\[ \Rightarrow \] The amount paid as SGST \[ = \dfrac{9}{{100}} \times 8000\]
Multiplying the terms, we get
\[ \Rightarrow \] The amount paid as SGST \[ = {\rm{Rs}}.720\]
We are given that the profit for Dealer B is Rs 1,200.
Thus, the selling price is given by the formula \[SP = CP + {\rm{Profit}}\].
Thus, the selling price for Dealer B \[ = 8000 + 1200\]
Thus, the selling price for Dealer B \[ = {\rm{Rs}}.9200\]
We are given that dealer B supplies goods/services worth Rs 9,200 to a dealer C.
So, the selling price for dealer B is Rs 9,200 and the cost price for dealer C is Rs 9,200.
One dealer is in U.P. and the other dealer is in Bihar, so the transaction is between inter state transactions.
So, the transaction has to be levied with IGST tax.
Thus, the amount paid as taxes for Dealer C is given by rate of tax multiplied by the cost price.
The amount paid as IGST \[ = 18\% \] of 9200
\[ \Rightarrow \] The amount paid as IGST\[ = \dfrac{{18}}{{100}} \times 9200\]
\[ \Rightarrow \] The amount paid as IGST\[ = {\rm{Rs}}.1656\]
Thus the Input tax for the dealer C \[ = {\rm{Rs}}.1696\]
Since the dealer C does not sell the goods/ services, there is no output tax.

Therefore, the input tax for dealer C is Rs. 1696 and the output tax is Rs. 0

Note:
We know that whenever an item is purchased, a tax amount has to be paid to the government. Tax is of three types in India: CGST, SGST, IGST. The central government for the intra state transactions levies CGST and SGST. IGST are levied for the interstate transactions. CGST and SGST should be the average of the rate of tax. CGST refers to Central Goods and Service Tax, SGST refers to State Goods and Service Tax, IGST refers to Integrated Goods and Service Tax.