Definitions [18]
These are the taxes paid by an individual or an organisation directly to the government.
These include Income Tax, Wealth Tax, Corporate Tax and Capital Gains Tax.
These are the taxes on goods and services paid by the customer, collected by an individual or an organisation and deposited with the government.
A dealer is a person who buys goods/services for resale.
It is the price at which an article is marked.
List price is also known as marked price (M.P.), printed price, quoted price, etc.
In order to sell out the old stock or for some other reason(s), shopkeepers offer a certain percentage of the list price as a discount.
This discount is always calculated on the list price.
It is the price at which a trader sells his/her goods, with any discount applied.
The selling price is also called the sale price.
Goods mean every kind of movable thing/property, i.e. anything which can be taken (moved) from one place to another.
Goods do not include money and securities. Securities mean: shares, stocks, bonds, debentures, etc.
Prior to 1st July 2017, we had a number of indirect taxes such as VAT, excise, service tax, etc. From 1st July 2017 onwards, the government of India has abolished all such indirect taxes and introduced a new (indirect) tax called Goods and Services Tax (GST).
Services mean anything other than goods, money and securities. Services include activities relating to the use of money, e.g. banking services, insurance services, etc.
Intra-state means: supply within the same state.
Inter-state means: supply between two different states or a state and a UT.
For any intrastate supply (within the state), half of the GST collected as output GST is deposited with the Central Government as CGST.
Example: If GST = 18%, CGST = 9%
For any local supply (supply within the same state or Union Territory), half of the output GST is deposited with the respective state or UT Government as the beneficiary. This is known as SGST/UGST.
Example: If GST = 18%, SGST/UGST = 9%
The GST levied on the supply of goods or services in case of interstate trade within India or for exports/imports is known as IGST.
The entire tax collected under IGST is paid to the account of the Central Government.
Example: If GST = 18%, IGST = 18%
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
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.
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.
Input tax credit means that while paying tax to the government on sale (output) of goods and services, you can avail the tax you have already paid on the purchase (input) of the said goods/services and pay only the balance amount as tax.
An E-way Bill is an electronic permit generated on the GST portal for transporting goods worth more than ₹50,000.
Formulae [2]
The selling price = List price - Discount = Discounted price
When an article is sold without any discount, its selling price = its list price.
GST Payable = Output GST − Input GST (ITC)
Key Points
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GST = Goods and Services Tax
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Indirect tax for the whole country
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Creates One Nation, One Market
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Not under GST:
Customs Duty, Road Tax, Stamp Duty, Property Tax, Toll Tax, Electricity Duty, Excise on Liquor, Petroleum taxes -
GST Registration:
₹20 lakh (normal states)
₹10 lakh (special states) -
One Country One Tax:
Same GST structure across India (CGST + SGST / IGST), but rates may differ for different goods & services. -
Destination-based tax:
Tax goes to the state of consumption -
GST Rate Slabs:
Goods and services in India are taxed under five fixed GST rates — 0%, 5%, 12%, 18% and 28% — based on their nature and necessity.
Only a registered dealer can claim ITC; consumers and composition dealers cannot.
GST Returns: GST Returns are periodic details filed by a registered dealer showing sales, purchases, ITC and tax paid.
- GSTR-1 → Sales
- GSTR-3B → Summary return & final tax payment
- GSTR-4 → Composition dealer
E-Ledger: An e-ledger is an electronic record on the GST portal for a registered dealer.
- Cash Ledger → cash paid
- Credit Ledger → ITC
- Liability Register → tax due
Important Questions [4]
- A Shopkeeper Bought a Washing Machine at a Discount of 20% from A Wholesaler, the Printed Price of the Washing Machine Being Rs. 18,000. The Shopkeeper Sells It to a Consumer at a Discount of 1
- The printed price of an article is ₹ 60000. The wholesaler allows a discount of 20% to the shopkeeper. The shopkeeper sells the article to the customer at the printed price. Sales tax (under VAT) is
- Tarun Bought and Article for Rs. 8000 and Spent Rs. 1000 for Transportation. He Marked the Article Rs. 11,700 and Sold It to a Customer. If the Customer Had to Pay 10% Sales Tax, Find: (3) (1) the Customer’S Price (2) Tarun’S Profit Percent.
- A Manufacturer Marks an Article for Rs. 5000. He Sells It to a Wholesaler at a Discount of 25% on the Marked Price and the Wholesaler Sells It to a Retailer at a Discount of 15% on the Marked Price
