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Goods & Service Tax

(GST) 2017
This Chapter Goods & Service Tax (GST) 2017 is taken from our:

ISBN : 9789386320278
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GOODS & SERVICE TAX (GST) 2017

GST-TAXES
Tax structure : 5%, 12%, 18%, & 28%
Cess surcharge beyond 28% are :
(i) Luxury cars 15%
(ii) Aerated drinks/water 15%
(iii) Panmasala 135%
(iv) Tobacco & cigarettes 290%
(v) Coal & lignite ` 400 / tonnes
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How will GST benefit consumer?
GST Collection system.
Present tax collection system. Example Example
Stage 1: Stage 1:
In the process of creating jeans, the manufacturer Under GST, Manufacturer can set off this tax
buys raw materials for `100 & adds value to the (`13) against the tax he has already paid on raw
materials he started out with. Let us take this value material/inputs (`10). Therefore, the effective
or/margin/profit added by him to be ` 30. The gross GST on the manufacturer will be only `3
value of his good would, be `130 (100 + 30). (13 10). He will sell good to wholesaler for `133
At a tax rate of 10%, the tax on output will be `13. (100 + 30 + 3).
Here good sold to wholesaler for `143 (130+13).
Stage 2:
Stage 2: Wholesaler adds margin of ` 20 on good. Its value =
The wholesaler purchases it for `143, and adds on `153(133 + 20)
value (his margin) of, say, `20. The gross value of Under GST, he can set off the tax on his output
jeans he sells would then be `163 (`143 + 20) (`15.30) against the tax on his purchased good
A 10% tax on this amount will be `16.3. from the manufacturer (`13). Thus, the effective
He will sell it to retailer for ` 179.30. (163 + 16.3). GST incidence on the wholesaler is only `
2.30 (15.30 13). He will set it to retailer for
Stage 3: ` 155.30(153 + 2.30)
To retailer purchase price of ` 179.30, he adds margin
of `10. The gross value of jeans goes up to `189.30 Stage 3:
(` 179.3 + 10). The tax on this, at 10%, will be Retailer adds margin of ` 10 on good. Its value = `
`18.93. 165.3(155.3 + 10) Tax 10% = 16.53
He will sell it to consumer for `208.23 (189.3 + But by setting off this tax (`16.53) against the tax on
18.93). his purchase from the wholesaler (`15.30), the retailer
brings down the effective GST incidence on himself to
` 1.23 (16.53 15.30). Here good total value = 165.30 +
1.23 = 166.53. i.e consumer buys it for `166.53.
So, the total GST on the entire value chain from
the raw material/input suppliers through the
manufacturer, wholesaler and retailer is, ` 10 + 3
+2.30 + 1.23, or `16.53.