Question

M/s Jay Chemicals purchased a liquid soap for $Rs.8000$ (with GST) and sold it to the consumers for $Rs.10000$ (with GST). Rate of GST is $18\mathrm{\%}$ . Find the amount of CGST and SGST to be paid by Jay Chemicals.

Answer 1

Hint: For a rate of $18\mathrm{\%}$ GST, there is half of it, i.e. $9\mathrm{\%}$ CGST and $9\mathrm{\%}$ SGST. So, half of the total amount of GST will go to CGST and the other half will go to SGST. For calculating the amount of GST, calculate the $18\mathrm{\%}$ of both cost price and selling price. Now the difference in this value will be the amount of GST. And half of this amount will represent CGST and SGST.

Complete step-by-step answer:
According to the information given, the shopkeeper purchased a liquid soap for $Rs.8000$ , i.e. the cost price(CP) for liquid soap is $Rs.8000$. The same soap is then sold to consumers for $Rs.10000$ , i.e. the selling price(SP) for liquid soap becomes $Rs.10000$. The rate of GST is given as $18\mathrm{\%}$ . With this information, we need to find the amount of CGST and SGST to be paid by the shop.
Before going for a solution, we should understand the concept of GST, CGST and SGST. Since GST is a destination-based tax, an end-user consuming any goods or services is liable to pay the Goods and Services Tax. The tax is received by the State in which the goods or services are consumed and not by the state in which such goods are manufactured. Here CGST stands for Central Goods and Services Tax and SGST stands for State Goods and Services Tax.
An example of CGST and SGST:
Let’s suppose Rajesh is a dealer in Maharashtra who sold goods to Anand in Maharashtra worth $Rs.10000$ . The GST rate is $18\mathrm{\%}$ consisting of CGST rate of $9\mathrm{\%}$ and SGST rate of $9\mathrm{\%}$ . In such a case, the dealer collects $Rs.1800$ of which $Rs.900$ will go to the Central Government and $Rs.900$ will go to the Maharashtra Government.
Let’s separately calculate GST on CP and SP.
For CP$=Rs.8000$ , $18\mathrm{\%}$ of $Rs.8000$ will be GST on the cost price
$\Rightarrow$ Amount of GST on CP $={\displaystyle \frac{18}{100}}\times 8000=18\times 80=Rs.1440$
Similarly, for SP$=Rs.10000$ , $18\mathrm{\%}$ of $Rs.10000$ will be GST on selling price
$\Rightarrow$ Amount of GST on SP $={\displaystyle \frac{18}{100}}\times 10000=18\times 100=Rs.1800$
Therefore, we got the amount of GST in CP and SP. So the amount of GST paid by Jay Chemicals will be the difference between these two amounts.
$\Rightarrow$ Amount of GST paid by Jay Chemicals $=Rs.1800-Rs.1440=Rs.360$
Since the $18\mathrm{\%}$ GST is the sum of $9\mathrm{\%}$ CGST and $9\mathrm{\%}$ SGST.

Therefore, the amount of CGST and SGST paid by Jay Chemicals$={\displaystyle \frac{360}{2}}=Rs.180\text{ each}$

Note: An alternative approach can be taken by calculating the profit, i.e. the difference in selling price and cost price. Then take $18\mathrm{\%}$ of the total profit made, i.e. $10000-8000=Rs.2000$ . The $18\mathrm{\%}$ of the profit will give you the amount of GST paid by Jay Chemicals.