GST Examples

GST - A detailed explanation with examples!
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GST - A detailed explanation with

examples!
Brief Intro: Introduction of Goods and Services
Tax
(GST)
will
indeed
be
an
important
perfection and the next logical step towards a
widespread indirect tax reforms in India. As per,

First
Discussion
Empowered
Paper
Committee
released
of
the
by
the
State
Finance Ministers on 10.11.2009, it has been

made clear that there would be a Dual GST in
India, i.e. taxation power lies with both by the
Centre and the State to levy the taxes on the Goods and Services.
The scheme was supposed to be implemented in India from 1st April 2016, however it may
get delayed since the NDA government does not have majority in Rajya sabha (The upper
house of parliament or the house of states).
Further, Punjab and Haryana were reluctant to give up purchase tax, Maharashtra was
unwilling to give up octroi, and all states wanted to keep petroleum and alcohol out of the
ambit of GST. Gujarat and Maharashtra want the additional one per cent levy extended
beyond the proposed two years, and raised to two per cent. Punjab wants purchase tax
outside GST.
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Constitutional Amendment: While the Centre is empowered to tax services and goods upto
the production stage, the States have the power to tax sale of goods. The States do not have
the powers to levy a tax on supply of services while the Centre does not have power to levy
tax on the sale of goods. Thus, the Constitution does not vest express power either in the
Central or State Government to levy a tax on the supply of goods and services. Moreover,
the Constitution also does not empower the States to impose tax on imports. Therefore, it is
essential to have Constitutional Amendments for empowering the Centre to levy tax on sale of
goods and States for levy of service tax and tax on imports and other consequential issue.
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What is GST?
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text=GST
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-/includes
A
detailed
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T Tax
module_name=articles&
explanation
with
share_title2=GST
and Service Tax (GST) is a comprehensive tax levy on manufacture, sale and
-examples!
A Goods
)
detailed
consumption of goods and service at a national level under which no distinction is made
explanation
with between goods and services for levying of tax. It will mostly substitute all indirect
examples!&share_url2=http
taxes levied on goods and services by the Central and State governments in India.
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GST is a tax on goods and services under which every person is liable to pay tax on his
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output and is entitled to get input tax credit (ITC) on the tax paid on its inputs(therefore a tax
on value addition only) and ultimately the final consumer shall bear the tax.
OBJECTIVES OF GST: One of the main objective of Goods & Service Tax(GST) would be to
eliminate the doubly taxation i.e. cascading effects of taxes on production and distribution cost
of goods and services. The exclusion of cascading effects i.e. tax on tax till the level of final
consumers will significantly improve the competitiveness of original goods and services in
market which leads to beneficial impact to the GDP growth of the country. Introduction of a
GST to replace the existing multiple tax structures of Centre and State taxes is not only
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desirable but imperative. Integration of various taxes into a GST system would make it
possible to give full credit for inputs taxes collected. GST, being a destination-based
consumption tax based on VAT principle.
Worldwide GST:
France was the first country to introduce GST in 1954. Worldwide, Almost 150 countries
have introduced GST in one or the other form since now. Most of the countries have a unified
GST system. Brazil and Canada follow a dual system vis--vis India is going to introduce. In
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China, GST applies only to goods and the provision of repairs, replacement and processing
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/intentservices. GST rates of some countries are given below:%2Fwww%2Ecaclubindia%2Ecom%2Farticles%2Fgst%2Da%2Ddetailed%2Dexplanation%2Dwith%2Dexamples
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Country
Rate of GST
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text=GST
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A
Australia
10%
detailed
explanation
with France
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19.6%
-examples!
A
)
detailed
explanation
Canada
5%
with
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Germany
19%
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Japan
5%
Singapore
7%
New Zealand
15%
Rate of GST:
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There would be two-rate structure a lower rate for necessary items and items of basic
importance and a standard rate for goods in general. There will also be a special rate for
precious metals and a list of exempted items. For goods in general, government is considering
pegging the rate of GST from 20% to 23% that is well above the global average rate of
16.4% for similar taxes, however below the revenue neutral rate of 27%.
Model of GST with example:
a. The GST shall have two components: one levied by the Centre (referred to as Central
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GST or CGST), and the other levied by the States (referred to as State GST
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/intentorSGST). Rates for Central GST and State GST would be approved appropriately, reflecting
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revenue considerations and acceptability.
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b. The CGST and the SGST would be applicable to all transactions of goods and
text=GST
services made for a consideration except the exempted goods and services.
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A
detailed
explanation
c. Cross utilization of ITC both in case of Inputs and capital goods between the CGST
with
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and )the SGST would not be permitted except in the case of inter-State supply of goods
-examples!
A
detailed
and services (i.e. IGST).
explanation
with
d. The Centre and the States would have concurrent jurisdiction for the entire value chain
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and for all taxpayers on the basis of thresholds for goods and services prescribed for the
States and the Centre.
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Example: 1(Comprehensive Comparison)

Comparison between Multiple Indirect tax laws and proposed one law
Particulars
Without GST
With GST
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(Rs.)
Manufacture to Wholesaler
Cost of Production
5,000.00
5,000.00
Add: Profit Margin
2,000.00
2,000.00
Invoice Value
8,820.00
8,680.00
7,840.00
7,000.00
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Manufacturer Price
7,000.00
7,000.00
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Add: Excise Duty @ 12%
840.00
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text=GST
Total Value(a)
7,840.00
7,000.00
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-/includes
A
detailed
explanation
Add: VAT @ 12.5%
980.00
with
share_title2=GST
-examples!
A
)
detailedAdd: CGST @ 12%
840.00
explanation
with
Add: SGST @ 12%
840.00
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Wholesaler to Retailer
COG to Wholesaler(a)
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Add: Profit Margin@10%
784.00
700.00
Total Value(b)
8,624.00
7,700.00
Add: VAT @ 12.5%
1,078.00
Add: CGST @ 12%
924.00
Add: VAT @ 12.5%
1,185.80
Add: CGST @ 12%
1,016.40
Add: SGST @ 12%
1,016.40
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Add: SGST @ 12%
924.00
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Invoice Value
9,702.00
9,548.00
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text=GST
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-/includes
A
detailedRetailer to Consumer:
explanation
with
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-examples!
A
) to Retailer (b)
COG
8,624.00
7,700.00
detailed
explanation
with Add: Profit Margin
862.40
770.00
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Total Value(c)
9,486.40
8,470.00
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Total Price to the Final

consumer
10,672.20
10,502.80
Cost saving to consumer
169.40
% Cost Saving
1.59
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Notes:
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Input tax credit available to wholesaler is Rs.980 and Rs.1,680 in case of
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without GST and with GST respectively.
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Likewise Input tax credit available to Retailer is Rs.1,078 and Rs.1,848 in
text=GST
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case of without GST and with GST respectively.
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A
detailed
explanation
with In case, VAT rate is also considered to be 12%, the saving to consumer
share_title2=GST
would
be 1.15%.
-examples!
A
)
detailed
explanation
with IGST Model (Inter-State Transactions of Goods & Services) and Input tax credit (ITC)
with example:
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a. Existing CST (Central state tax, tax on interstate movement of goods) shall
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be discontinued.
b. Center would levy IGST (cumulative rate for CGST and SGST) on all inter-State
transactions of taxable goods and services with appropriate provision for consignment or
stock transfer of goods and services.
c. The ITC of SGST, CGST shall be allowed as applicable.

d. Since ITC of SGST shall be allowed, the Exporting State will transfer to the Centre the
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credit of SGST used in payment of IGST. The Importing dealer will claim credit of IGST while
discharging his SGST liability (while selling the goods in state itself). Thereafter, the Centre
will transfer to the importing State the credit of IGST used in payment of SGST.(Please see
example 4 & 5)
e. The relevant information shall be submitted to the Central Agency which will act as a
clearing house mechanism, verify the claims and inform the respective state governments or
central government to transfer the funds.
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Advantage of IGST:
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o No refund claim in exporting State, as ITC is used up while paying the tax.
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o Maintenance of uninterrupted ITC chain on inter-State transactions.
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o No upfront payment of tax or substantial blockage of funds for the inter-State seller or buyer.
detailed
explanation
with Example 2 (Input Tax Credit)
share_title2=GST
-examples!
A
)
detailed
Shiva, a registered dealer had input tax credit for CGST and SGST Rs.750/- and Rs.1,050/explanation
with respectively in respect of purchase of inputs and capital goods. He manufactured 1800 liters
of finished products. 200 liters was normal loss in the process. The final product was sold at
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uniform price of Rs.10 per liter as follows:%2D%2D23835%2Easp%3Futm%5Fsource%3Darticles%26utm%5Fmedium%3Dsharebar%26utm%5Fcampaign%3Dsoci
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Goods sold within State 800 liter.
Finished product sold in inter-State sale 650 liter.

Goods sent on stock transfer to consignment agents outside the State 350 liter.
Further, CGST and SGST rate on the finished product of dealer is 5% and 7% respectively.
Further IGST rate is 12%. Calculate tax liability of SGST and CGST to be paid after tax
credit.
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Solution:
Output Tax Calculation
Particulars
Sales Within State
Stock Transfer Outside State
Inter State Sales
Qty. Sold
800
350
650
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10
10
10
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unit
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Value of
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Goods
8,000
3,500
6,500
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Sold
text=GST
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A
detailedTax
Amount:
explanation
with
share_title2=GST
-examples!
A
)
detailedTax
Amount400
explanation
with CGST(5%)
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Tax
Amount560
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SGST(7%)
Tax
AmountIGST(12%)
420
780
Calculation of Tax Payable
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Particulars
CGST
SGST
IGST
Tax
Payable
Amount
400
560
1200
Total
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Input Tax
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Credit
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CGST
400
350
750
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text=GST
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A
detailedSGST
560
490
1050
explanation
with
share_title2=GST
-examples!
A
)
Balance
detailed
360
360
Payable
explanation
with
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Notes:
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a. There would be no treatment for normal loss.
b. Input tax credit of CGST and SGST of Rs. 750 and Rs. 1050 are paid on inputs. This input
tax credit should first be utilized for payment of CGST and SGST, respectively, and balance is
to be used for payment of IGST. Thus, balance available for payment of IGST is Rs. 350 of
CGST and Rs. 490 of SGST and he is liable to pay balance amount of IGST of Rs. 360 by
cash (1200-350-490 = 360). Since credit of SGST of Rs.490 has been utilized for payment of
IGST, the State Government will get debit of Rs. 490 from the Central Government.
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Example 3 (Input Tax Credit)

Now, continuing with the above example 2, suppose the dealer purchases goods interstate
and have input tax credit of IGST available is Rs.2,000/-. Compute the tax payable.
Solution:
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Particulars
CGST
SGST
IGST
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Tax
Payable
400
560
1,200
Amount
text=GST
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-/includes
A
detailed
Less: Input Tax
explanation
Credit
with
share_title2=GST
-examples!
A
)
detailed
CGST
explanation
with
SGST
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IGST
400
400
1,200
2000
Balance
Payable
160.00
160
Note: Input tax credit of Rs.2000, IGST is available. This input tax credit should first be
utilized for payment of IGST and balance is to be used first for payment of CGST and
remaining for SGST. Likewise in this case Rs.400 and balance Rs.400 are utilized for CGST
and SGST respectively. He is liable to pay balance amount of SGST of Rs.160 by

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cash.(2000-1200-400-560 = 160).
Some Specific points for specific products (being high revenue generating products)
This tax does not apply to alcohol and petroleum products. They will be continued
Tax on Tobacco products will be subject to GST. But government can levy the extra
to be taxed as per the existing practices.
tax percent over and above GST rate.
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Other key points:
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a. Manufacturing state (the state in India in which the goods are manufactured) will be
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allowed to levy an additional tax percent (say 1%) on supply of goods.
text=GST
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-/includes
A b. PAN based identification number will be allowed to each taxpayer to have integration of
detailed
GST with Direct Tax.
explanation
with
share_title2=GST
-examples!
A c. The
) taxpayer would need to submit periodical returns, in common format as far as
detailed
possible, to both the CGST authority and to the concerned SGST authorities.
explanation
with
Exemption/Composition Scheme under GST:
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a. The Small Taxpayer: The small taxpayers whose gross annual turnover is less than 1.5
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Crore will not be covered by GST law and no need to pay tax.
b. Scope of composition and compounding scheme under GST to be provided for this
purpose, an upper ceiling on gross annual turnover (say Rs.50 Lacs) and a floor tax rate (say
0.5%) with respect to gross annual turnover should be provided.
c. Treatment for goods exempt under one state and taxable under the other to be
provided.
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d. List of exempt items which shall be outside the purview of GST shall be provided.
GST on Export & Import with example:
a. GST on export would be zero rated
b. Both CGST and SGST will be levied on import of goods and services into India. The
incidence of tax will follow the destination principle i.e. SGST goes to the state where it is
consumed. Complete set-off will be available on the GST paid on import on goods and
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services.
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Example-4 (Import)
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Shri Shiva imported goods for Rs. 10,000/- and incurred expenses to produce final saleable
goods. BCD @ 10 % was chargeable on imported goods. These manufactured goods were
text=GST
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A
sold within the state at Rs. 45,000 plus applicable GST. Rate of CGST and SGST is 5% and
detailed
7% respectively. Compute Cost, Sale value and tax payable for the transaction.
explanation
with
share_title2=GST
-examples!
A
)
Solution: Calculation of Net cost of imported goods
detailed
explanation
with
Amount
Particulars
%3A%2F
(Rs)
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Cost of Goods imported
10,000
Add: Basic
Duty @ 10%
1,000
Customs
Cost of imported goods

(including BCD)
11,000
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Add: CGST on Import

@ 5%
550
Add: SGST on Import

@ 7%
770
Cost
of
imported
goods (including BCD
& GST) (Note below)
12,320
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Calculation of Sale value after import
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Particulars
Amount(Rs)
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text=GST
Sale Value (before tax)
45,000
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-/includes
A
detailed
explanation
Add: CGST on Import
2,250
with
share_title2=GST
@ 5%
-examples!
A
)
detailed
explanation
Add: SGST on Import
3,150
with
@ 7%
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Sales Value
50,400
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Tax Payable Calculation
Particulars
CGST
SGST
(Rs.)
(Rs.)
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Output tax
2,250
3,150
Less: Input tax credit
CGST
550
SGST
770
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Net tax payable
1,700
2,380
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Note: Please note that GST shall be levied including Basic Customs Duty considering.
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Example-5 (Export)
text=GST
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A
Now continuing with the above example 4, suppose the same good is exported after 1 year of
detailed
explanation
use after adding margin and modification amounting Rs.10,000/- and use factor of 1 year for
with
share_title2=GST
-examples!
A refund
) calculation is 0.20. Therefore the refund will be 0.80 of Duty amount. Compute Export
detailed
Value and Refund Value.
explanation
with
Solution: Export Value calculation
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Amount
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Particulars
Cost
of
Goods(from
example)
(Rs)
Imported
above
50,400
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Add:
Margin
Modification Amt.
and
10,000
Sale Value
60,400
Add: CGST on Export

@ 5%
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@ 7%
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Export Value
60,400
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Refund Calculation
text=GST
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A
detailed
Amount
explanation
with Particulars
share_title2=GST
-examples!
A
)
(Rs)
detailed
explanation
with
Basic
Customs
Duty(BCD, from above 1,000.00
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example)
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Refund Factor
0.80
Refund amount of BDC
800.00
Add:
CGST(from
above example)
550.00
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Add: SGST(from above

example)
770.00
Total Refund amount
2,120.00
The above example withstand two basic principles of Taxation Laws i.e. Exports are
zero rated and the incidence of tax will follow the destination principle (The taxes will
remain with the state where the goods are used, however use factor can be prescribed by the
law)
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/intentIndirect taxes that will be included under GST:%2Fwww%2Ecaclubindia%2Ecom%2Farticles%2Fgst%2Da%2Ddetailed%2Dexplanation%2Dwith%2Dexamples
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State taxes which will be subsumed in SGST
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text=GST
VAT/Sales Tax
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A
detailed
explanation
Entertainment Tax (unless it is levied by local bodies)
with
share_title2=GST
-examples!
A
)
Luxury
Tax
detailed
explanation
with Taxes on lottery, betting and gambling.
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State cess and surcharges to the extent related to supply of goods and services.
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Entry tax not on in lieu of octroi.
Central Taxes which will be subsumed in CGST

Central Excise Duty.
Additional Excise Duty.
The Excise Duty levied under the medical and Toiletries Preparation Act
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Service Tax.
Additional Customs Duty, commonly known as countervailing Duty (CVD)
Special Additional duty of customs(SAD)
Education Cess
Surcharges
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Taxes that may or may not be subsumed due to no consensus between the Central and
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/intent
State Governments:
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Stamp Duty
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text=GST
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-/includes
A Vehicle Tax
detailed
explanation
Electricity Duty
with
share_title2=GST
-examples!
A
)
detailed
Other Entry taxes and Octroi
explanation
with
Entertainment Tax (levied by local bodies)
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Basic customs duty and safeguard duties on import of goods into India
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Other Benefits of GST apart from discussed in first 2-3 paragraph of this article:
Reduces transaction costs and unnecessary wastages: A single registration and a
single compliance will suffice for both SGST and CGST provided government produces
effective IT infrastructure and integration of states level with the union.
Eliminates the multiplicity of taxation: The reduction in the number of taxation applicable
in a chain of transaction will help to reduce the paper work and clean up the current mess that
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is brought by existing indirect taxation laws.

One Point Single Tax: They would be focus on business rather than worrying about their
taxation that may crop at later stages. This will help the business community to decide their
supply chain, pricing modalities and in the long run helps the consumers being goods
competitive as price will no longer be the function of tax components but function of sheer
business intelligence and innovation.
Reduces average tax burdens:- The cost of tax that consumers have to bear will be certain
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and it is expected that GST would reduce the average tax burdens on the consumers.
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Reduces the corruption:- As the no. of taxes reduces so does the no of visits to multiple
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department reduces and hence the reduction in corruption.
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text=GST
In all cases except a few products and states, there would be uniformity of tax rates
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-/includes
A
across the states.
detailed
explanation
with General points on Various Business Sectors that arise after GST implementation:share_title2=GST
-examples!
A
)
detailed
Real Estate Industry: Construction and Housing sector need to be included in the GST tax
explanation
with
base being high tax revenue generating sector and for reduction in no. of tax legislations
involved.
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FMCG Sector: .Implementation of proposed GST and opening of Foreign Direct Investment
(F.D.I.) are expected to fuel the growth and raise industrys size.
Rail Sector: There have been suggestions for including the rail sector under the GST
umbrella to bring about significant tax gains and widen the tax net so as to keep overall GST
rate low. This will have the added benefit of ensuring that all interstate transportation of
goods can be tracked through the proposed Information technology (IT) network.
Information Technology enabled services: At present, if the software is transferred through
11-11-2016 03:24 PM
electronic form, it should be considered as Intellectual Property and regarded as a service and
if the software is transmitted on media or any other tangible property, then it should be treated
as goods and this classification is full of litigation. As GST will have uniform rate for Goods
and Services and no concept of state revenue being VAT or central revenue being service tax
and hence, the reduction in litigation.
Transport Sector: Truck drivers spend more than half of their time while negotitating
check post and tolls. At present there are more than 600 check points and more than ton
types of taxes in road sector.
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a. Those
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downward changes in the threshold in some States consequent to the introduction of GST
may result in obligation being created for some dealers.
Questions, please ask?
At what point of time, the tax will be levied?
What will be the nature of Taxable Event?
GST is proposed to be levied by both the CG and SGs. How will it be defined under CGST
11-11-2016 03:24 PM
and SGST?
Printable in Hard form for easy reference, Tried and Tested
Hope you got the sound understanding of the provisions of GST.
For any kind of professional Assistance, please reach out to me freely and preferably by mail
or mobile.
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Add: F-50, Near Gurudwara, Madhu Vihar, I.P. Extension, Patparganj, Delhi-92
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Link to Previous Article on MAT provisions (IT Act, 1961) of Author:
http://www.caclubindia.com/articles/provisions-of-mat-amt-22594.asp#.VVgjybmqqko
(http://www.caclubindia.com/articles/provisions-of-mat-amt-22594.asp#.VVgjybmqqko)
No part of this article shall be reproduced, copied in any material form (including e-medium)
without written permission of CA. Shivashish.
The information provided is not a substitute for legal and other professional advice where the
facts and circumstances warrant. If any person requires legal advice or other professional
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Home (/) / Articles (/articles/) / GST (article_display_list_by_category.asp?cat_id=54)

GST - A detailed explanation with

perfection and the next logical step towards a

widespread indirect tax reforms in India. As per,

Finance Ministers on 10.11.2009, it has been

India, i.e. taxation power lies with both by the

GST - A detailed explanation with examples!

GST - A detailed explanation with examples!

GST - A detailed explanation with examples!

Example: 1(Comprehensive Comparison)

GST - A detailed explanation with examples!

Add: Profit Margin

GST - A detailed explanation with examples!

Add: Profit Margin@10%

Add: VAT @ 12.5%

Add: CGST @ 12%

Add: VAT @ 12.5%

Add: CGST @ 12%

Add: SGST @ 12%

GST - A detailed explanation with examples!

Total Price to the Final

Cost saving to consumer

c. The ITC of SGST, CGST shall be allowed as applicable.

GST - A detailed explanation with examples!

Goods sold within State 800 liter.

Finished product sold in inter-State sale 650 liter.

GST - A detailed explanation with examples!

Sales Within State

Stock Transfer Outside State

Inter State Sales

Calculation of Tax Payable

GST - A detailed explanation with examples!

Calculation of Tax Payable

a. There would be no treatment for normal loss.

GST - A detailed explanation with examples!

Example 3 (Input Tax Credit)

and SGST respectively. He is liable to pay balance amount of SGST of Rs.160 by

GST - A detailed explanation with examples!

to be taxed as per the existing practices.

GST - A detailed explanation with examples!

Cost of Goods imported

Cost of imported goods

GST - A detailed explanation with examples!

Add: CGST on Import

Add: SGST on Import

Tax Payable Calculation

GST - A detailed explanation with examples!

Less: Input tax credit

GST - A detailed explanation with examples!

Add: CGST on Export

Refund amount of BDC

GST - A detailed explanation with examples!

Add: SGST(from above

Total Refund amount

Entry tax not on in lieu of octroi.

Central Taxes which will be subsumed in CGST

GST - A detailed explanation with examples!

GST - A detailed explanation with examples!

is brought by existing indirect taxation laws.

Information Technology enabled services: At present, if the software is transferred through

GST - A detailed explanation with examples!

GST - A detailed explanation with examples!

Link to Previous Article on MAT provisions (IT Act, 1961) of Author: