Mathematics
A wrist watch was sold by a wholesaler from Mumbai (Maharashtra) to a dealer in Indore (MP) for ₹ 22,000. The dealer in Indore sold it to an end-user in Gwalior (MP) at a profit of ₹ 5,000. If the rate of GST is 18%, calculate :
(i) the net IGST, CGST and SGST payable by the dealer in Indore.
(ii) the cost price of the watch for the end-user.
GST
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Answer
A wrist watch was sold by a wholesaler from Mumbai (Maharashtra) to a dealer in Indore (MP) for ₹ 22,000
This is an interstate sale. Therefore, IGST will be levied.
Selling Price (from Wholesaler to Dealer): ₹ 22,000
IGST charged by Wholesaler : 18% of ₹ 22,000
= × 22,000
= ₹ 3,960
This ₹ 3,960 IGST becomes the Input Tax Credit (ITC) for the dealer in Indore.
Dealer (Indore, MP) sold it to an end-user in Gwalior (MP) at a profit of ₹ 5,000.
This is an intrastate sale. Therefore, CGST and SGST will be levied. The GST rate of 18% is split equally: 9% for CGST and 9% for SGST.
Cost Price for Dealer in Indore : ₹ 22,000
Profit for Dealer in Indore : ₹ 5,000
Selling Price (from Dealer to End-user): ₹ 22,000 + ₹ 5,000 = ₹ 27,000
CGST charged by Dealer : 9% of ₹ 27,000
= × ₹ 27,000
= ₹ 2,430.
SGST charged by Dealer : 9% of ₹ 27,000
= × ₹ 27,000
= ₹ 2,430.
(i) The dealer in Indore has an output GST liability from the sale to the end-user (CGST and SGST) and has an IGST input tax credit from the initial purchase.
Output GST for the dealer in Indore :
Output CGST = ₹ 2,430
Output SGST = ₹ 2,430
Input Tax Credit (ITC) available for the dealer in Indore:
IGST ITC = ₹ 3,960
Utilization of ITC:
According to GST rules, IGST credit can be used to offset IGST liability first, then CGST, and then SGST.
Offsetting Output CGST:
Output CGST = ₹ 2,430
IGST ITC used against CGST = ₹ 2,430
Remaining IGST ITC = ₹ 3,960 - ₹ 2,430 = ₹ 1,530
Net CGST payable by dealer = ₹ 0
Offsetting Output SGST:
Output SGST = ₹ 2,430
Remaining IGST ITC available = ₹ 1,530
IGST ITC used against SGST = ₹ 1,530
Net SGST payable by dealer = ₹ 2,430 - ₹ 1,530 = ₹ 900
Net IGST payable by dealer: Since there was no output IGST for the dealer in Indore (their sale was intrastate) and all their input IGST was utilized, the net IGST payable is zero.
Net IGST payable = ₹ 0.
Hence, net IGST payable = ₹ 0, net CGST payable = ₹ 0 and net SGST payable = ₹ 900.
(ii) Selling price of watch for dealer in Indore to end user (excluding tax) = ₹ 27,000
GST = 18% of ₹ 27,000
= ₹ 4,860.
Cost for end user = ₹ 27,000 + ₹ 4,860 = ₹ 31,860.
Hence, cost for end user = ₹ 31,860.
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