Goods and Services Tax (GST) - Mr Lancer D'Souza

GST (Goods and Services Tax) in simple words, “Single Taxation”.

What do you mean by “Single Taxation”???

If you are a wholesaler, you buy a product from Manufacturer for Rs 110(Manufacturer is already paid 10% tax). Your additional charges (value added) say, Rs 30. Now the tax is calculated only on your additional charges Rs 30 (i.e. Rs 3) not on 140. Why not on 140??? Because the amount of Rs 110 is already inclusive of tax and it is taxed in the hand of manufacturer. So, there is no tax on tax; only single tax.

Find Chart 3 which gives easy explanation how GST is calculated.

For Ex: Let us assume, A product is purchased from wholesaler by a retailer at Rs 110 (inclusive tax), Retailer’s value added is Rs 30 and the tax is 10%. 

Then,

The tax amount and product price before implementation of GST is:

Tax is 110+30=140*10%=14

Product price in the hand of customer is Rs 154(110+30+14).

The tax amount and product price after implementation of GST would be:

Tax is 30*10% = 3 [100+30=130*10%=13-10=3]

Product price in the hand of customer would be Rs 143(100+10 & 30+3).

In this system, double tax is removed. Tax on wholesaler’s value added (Rs 100) is not included because he has already paid the tax. i.e. Rs 10

How GST works in the Life cycle of a product.

How product is priced before implementation of GST
Chart 1 :

	Value added	Price	10% Tax	Total (Price+Tax)
Manufacturer	100	100	10 (100*10%)	110 (100+10)
Wholesaler	40	150 (110+40)	15 (150*10%)	165 (150+15)
Retailer	30	195(165+30)	19.5 (195*10%)	214.5(195+19.5)

Consumer gets product for Rs 214.50

Tax is calculated on Price not on value added. So, it is called double taxing or tax on tax

How product is priced after implementation of GST 
 Chart 2 :

	Value added	Price	10% Tax	Total(Price+Tax)
Manufacturer	100	100	10(100*10%=10)	110 (100+10)
Wholesaler	40	150 (110+40)	4(100+40=140*10%=14-10=4)   *	154(150+4)
Retailer	30	184(154+30)	3(100+40+30=170*10%=17-10-4=3 #	187(184+3)

Consumer gets product for Rs 187.00

Tax is calculated on value added. So, there would be no chance of double taxing.

*  In this point, total tax is 140*10%=14. Since the Manufacturer is already paid the tax of Rs 10. Wholesaler can claim Rs 10 tax. i.e. 14-10. So, the tax is just Rs 4.

# In this point, total tax is 170*10%=17. Since the Manufacturer is already paid the tax of Rs 10 and Rs 4 by wholesaler, retailer can claim 10+4 tax. i.e. 17-10-4. So, the tax is just Rs 3.

[Simplest way to calculate the tax is, only on your value-added price:

*    40*10%= 4

#   30*10%=3 ]

One more easy explanation:
How product is priced after implementation of GST 
Chart 3 :

	(A)	(B)	(C)	(D)	Total
	Price	Price without tax	Value added	10% Tax
Calculation -		[A-Previous Tax ‘D’]		B+C*10%	(B+C+D)
Manufacturer			100	10(100*10%=10)	110 (100+10)
Wholesaler	110	100(110-10)	40	14(140*10)	154(100+40+14)
Retailer	154	140(154-14)	30	17(170*10%)	187(140+30+17)

Tax Paid by Manufacturer is Rs 10, Tax paid by wholesaler is Rs 4 (14-10), Tax Paid by Retailer is Rs 3 (17-14).

So, if the product is sold with 10% tax before GST and the same tax is given after GST then the difference would be 214.5-187= 27.5. If you are thinking after implementation of GST you have saved a lot of money, then you are wrong.!!! It is not necessary tax rate is same after implementation of GST. Government of India has categorized the tax rates.

Suppose if the product tax rate is 10 % before GST and same product is charged 18% after GST then,

170*18%= 30.6+170=200.6 so now the difference is 214.5-200.6=13.9. In this case, tax saved is Rs 13.9

Besides, GST tagline is “one nation one tax one market”. You might have heard people saying, all the taxes are removed and only one tax after July 01, 2017. But you might not have heard about SGST CGST and IGST. Yes. These are the three parts of GST. Since I’m into accounts for me these are three types of headache. Ooops… three types of GST.

1.SGST= State Goods and Services Tax (GST portion for State Govt)

2.CGST= Central Goods and Services Tax (GST portion for Central Govt)

3.IGST= Integrated Goods and Services Tax (Interstate transactions)

Suppose, If the tax is 18% then 9% tax is shared by state govt and 9% by Central govt. i.e. SGST=9% and CGST=9%. If the product is manufactured in Karnataka and sold in Kerala, then IGST is calculated.

If you are a service tax payer, even now you have an option to deduct the service charges in case if you have paid service tax anywhere. (i.e. Hotels, Café, Post office)

Conclusion:

GST is a single taxation policy. Gradually it helps everyone. It is good move from central government of India, in fact it is also proposed by UPA government too. About the GST calculation, for an accountant it is not just GST but rather it is SGST, CGST and IGST. Consequently, the work load of accounts department will increase after implementation of GST.  Whereas, consumer no need to worry about the SGST CGST and IGST. Because for a consumer it is just GST.

Note: To avoid confusion do not read from brackets.

Funny facts about GST:

Modi government has implemented GST but opposition party had objected, same situation was during Manmohan Singh's government. So, it is called “Politics”

At present, it is called service tax, after July 01,2017 it will be called Goods and Service tax. "Goods" is added to services tax, so it becomes Goods + Service tax… Goods and Services Tax. I’m very good at Mathematics😁.

I heard and read, GST Rules are not ready, Softwares are not ready, companies are not ready, Businessmen are not ready and the Central government is not ready to accept that no one is ready.

Thanks for reading. To know more about GST. Please visit official website of Government of India. http://www.cbec.gov.in/htdocs-cbec/gst

E&OE

If you find any errors or inaccuracies in this article, please bring to my notice.
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