हिंदी
Maharashtra State BoardSSC (English Medium) 10th Standard

Computational Mechanisms under GST

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Topics

  • GST as a value-added tax
  • Definition: Reverse Charge Mechanism (RCM)
  • Definition: Composition Scheme
CISCE: Class 10

Definition: GST on Value Addition

GST is charged only on the value added, i.e. the difference between the sale price and the purchase price.

GST payable = Output GST − Input GST.

Example:

  • Purchase price = ₹5,000
  • GST paid on purchase (Input GST @12%) = ₹600
  • Sale price = ₹6,000
  • GST collected on sale (Output GST @12%) = ₹720

GST payable to the government
= Output GST − Input GST
= ₹720 − ₹600
= ₹120

CISCE: Class 10

Definition: Reverse Charge Mechanism

Reverse Charge Mechanism (RCM) is a system in which the receiver of goods or services, instead of the supplier, is liable to pay GST to the Government.

Example:

If a registered business takes services from an unregistered supplier, then the receiver has to pay GST directly to the Government under the Reverse Charge Mechanism.

Maharashtra State Board: Class 10
CISCE: Class 10

Definition: Composition Scheme

The Composition Scheme is a scheme for small taxpayers with an annual turnover of less than ₹1.5 crore, under which they pay GST at a fixed low rate and cannot collect GST from customers.

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