Question

Heena enterprises sold cosmetics worth Rs. 25000 to Leena traders, a retailer. Leena traders sold it further to Meena beauty products for Rs. 30000. Meena beauty product sold it further to the customer for Rs. 40000. Rate of GST is 18%. Find: -
(i) GST payable by each party
(ii) CGST and SGST

Answer 1

Hint: To find the GST for each party, first of all calculate their output and input tax one by one. Output tax for each will be calculated by finding 18% of the selling price of each party. Now, input tax for Heena enterprises will be 0, for Leena traders the input tax will be equal to the output tax of Heena enterprises, for Meena beauty products the input tax will be equal to the output tax of Leena traders. Use the formula GST = Output tax – Input tax for each. To calculate CGST and SGST use the relation CGST = SGST = $\dfrac{1}{2}\times $ GST for each party.

Complete step by step answer:
Here we have been provided with a trading chain where cosmetics are sold from Heena enterprises to Leena traders, from Leena traders to Meena beauty products and from Meena beauty products to customers. We have to find the GST, CGST and SGST payable by each party with the rate of GST equal to 18%.
GST is given by the formula GST = Output tax – Input tax, where output tax is paid on the selling price and input tax is paid on the purchased goods. Let us find the GST for each party one by one.
(1) Heena enterprises sold the cosmetics at Rs. 25000 but did not purchase from any other party, so the input tax = Rs. 0 and output tax = 18% of Rs. 25000.
$\Rightarrow $ Output tax = $\dfrac{18}{100}\times 25000$
$\Rightarrow $ Output tax = Rs. 4500
$\Rightarrow $ GST payable by Heena enterprises = Rs. 4500 – Rs. 0
$\therefore $ GST payable by Heena enterprises = Rs. 4500
We know that CGST = SGST = $\dfrac{1}{2}\times $ GST, so we get,
$\Rightarrow $ CGST and SGST payable by Heena enterprises = $\dfrac{1}{2}\times $ Rs. 4500
$\therefore $ CGST and SGST payable by Heena enterprises = Rs. 2250
(2) Leena traders sold cosmetics at Rs. 30000 and purchased it from Heena enterprises, so the input tax of Leena traders = Output tax of Heena enterprises = Rs. 4500 and output tax = 18% of Rs. 30000.
$\Rightarrow $ Output tax = $\dfrac{18}{100}\times 30000$
$\Rightarrow $ Output tax = Rs. 5400
$\Rightarrow $ GST payable by Leena traders = Rs. 5400 – Rs. 4500
$\therefore $ GST payable by Leena traders = Rs. 900
We know that CGST = SGST = $\dfrac{1}{2}\times $ GST, so we get,
$\Rightarrow $ CGST and SGST payable by Leena traders = $\dfrac{1}{2}\times $ Rs. 900
$\therefore $ CGST and SGST payable by Leena traders = Rs. 450
(3) Meena beauty products sold cosmetics at Rs. 40000 and purchased it from Leena traders, so the input tax of Meena beauty product = Output tax of Leena traders = Rs. 5400 and output tax = 18% of Rs. 40000.
$\Rightarrow $ Output tax = $\dfrac{18}{100}\times 40000$
$\Rightarrow $ Output tax = Rs. 7200
$\Rightarrow $ GST payable by Meena beauty product = Rs. 7200 – Rs. 5400
$\therefore $ GST payable by Meena beauty product = Rs. 1800
We know that CGST = SGST = $\dfrac{1}{2}\times $ GST, so we get,
$\Rightarrow $ CGST and SGST payable by Meena beauty product = $\dfrac{1}{2}\times $ Rs. 1800
$\therefore $ CGST and SGST payable by Meena beauty product = Rs. 900

Note: Note that the full form of GST is Goods and Service Tax, CGST is Central Goods and Service Tax and SGST is State Goods and Service Tax. Remember the basic terms like input and output tax and the formula of GST to solve the above question. The payable GST is distributed equally among Centre and State and this is the reason that we have the relation CGST = SGST.