Question

Smt. Malhotra purchased solar panels for the taxable value of Rs.85000. She sold them for Rs.90000. The rate of GST is 5%. Find the ITC of Smt. Malhotra. What is the amount of GST payable by her?

Answer 1

Hint: In this question, cost price and the selling price of the solar panel is given so we will first find the Input tax credit (ITC) for the 5% GST amount and output tax at 5% tax on the selling price and then we will find their difference to find amount of GST payable by her.

Complete step-by-step answer:
Taxable purchase value of the solar panels \[ = Rs.85000\]
Rate of GST on the solar panels \[ = 5\% \]
Now since the total Input tax credit is the GST rate paid on the product, hence the Input tax credit (ITC) will be 5% of the Rs.85000
 \[ = \dfrac{5}{{100}} \times 85000 = Rs.4250\]
Now it is given that the selling price of the solar panels \[ = Rs.90000\]
So the output tax on the solar panels will be 5% of Rs.90000 which is \[ = \dfrac{5}{{100}} \times 90000 = Rs.4500\]
Now that GST payable amount which is the difference of the Output tax and the Input tax will be \[ = OTC - ITC = Rs.4500 - Rs.4250 = Rs.250\]
Hence, we can say the amount of ITC paid on the solar panels by Smt. Malhotra is \[Rs.4250\] and the amount of GST paid on the solar panels is \[Rs.250\]
So, the correct answer is “ \[Rs.250\]”.

Note: Here, ITC stands for the Income Tax Credit which will be applicable on the credit of the amount earlier used by an individual whereas GST stands for the Good Service Tax and which could be calculated as the difference in the ITC for the GST amount and the output tax amount.