Nazama is a proprietor of film, regenerated under GST. She has said GST of Rs. 12,500 on purchase and collected Rs. 14,750 on sale. What is the amount of ITC to claim? What is the amount of GST playable?
Hint: GST paid by Nazama on purchase is equal to input tax and GST collected by Nazama on sale is equal to output tax. Both of these things are given, try to find a relation with the result and then proceed.
Complete step-by-step answer: Now, Tax collected at the time of purchase = input tax = Rs. 12,500 ∴ Amount of the ITC to be claimed by Nazama = Rs 12,500 Tax collected at the time of sale = output tax = Rs. 14,750 ∴ Amount of ITC to be claimed by Nazama = Rs. 14,750 ∴ GST payable = Tax collected at the time of sale – Tax collected at the time of purchase = Rs. 14,750 – Rs. 12,500 = Rs. 2,250 Thus, the amount of GST payable by Nazama is Rs. 2,250
Note: GST (Goods and Services Tax) is a value added tax levied on most goods and services sold for domestic consumption. It is paid by the consumers and remitted to the government. ITC (Input tax Credit) is the tax that a business pays on a purchase and that it can be used to reduce its tax liability when it makes a sale. Amount of GST payable = GST received – ITC.