What is GST: An indirect tax levied under a single tax system in India. It replaced taxes like sales tax, VAT, entertainment tax, etc., with a single tax.
Launch: Introduced on July 1, 2017.
One Nation One Tax: A single tax from Kashmir to Kanyakumari.
Types of GST
CGST (Central GST): Goes to the central government.
SGST (State GST): Goes to the state government.
IGST (Integrated GST): Applied to interstate transactions.
GST from Firm and Business Point of View
Input GST: GST that a firm has to pay when purchasing goods. Also known as Input GST or GST Paid.
Output GST: GST collected by a firm when selling goods.
GST Formula
GST Payable:
Formula: Output GST - Input GST
If Output GST is higher, GST Payable will be due.
If Input GST is higher, GST credit will be given.
GST Credit:
Formula: Input GST - Output GST
If Input GST is higher, it is considered GST Credit.
How GST is Applied Like an IDE
Intra-State Transaction: Both CGST and SGST are applied.
Inter-State Transaction: IGST is applied.
Consumer's Point of View
Price Including GST (PI GST):
Formula: Taxable Value * (100+GST%) / 100
This is the price the consumer pays.
GST Calculation:
Both CGST and SGST are applied 50-50%.
Calculation Examples
Example 1
Cost Price: 1,00,000
GST Rate: 18%
Input GST = 18% of 1,00,000 = 18,000
Output GST = 18% of 2,00,000 = 36,000
GST Payable = 36,000 - 18,000 = 18,000
Example 2
Cloth worth 1,00,000, 10% discount = Taxable Value of 90,000
GST = 18% of 90,000 = 16,200
Price Including GST = Taxable Value + GST = 90,000 + 16,200 = 1,06,200
Conclusion
By understanding GST properly, one can easily solve tax-related issues.
In most cases, the consumer ultimately bears the GST burden.