17TH AUG 2010
How GST will work in Our Country?
In India the states and Centre are agree on “Dual GST” in which a single transaction of sale of Goods will be taxed both by the state and centre. Let us try to understand this with the help of an example:-
Illustration under proposed GST
X of Mumbai has purchased some Goods worth Rs. 80000.00 from a trader for resale. Suppose the Rate of is 10% under SGST and CGST hence he has paid Rs.8000.00 as SGST and Rs.8000.00 as CGST.
X sells these goods for Rs. 100000.00 to Y of the Pune of the same state then X will charge Rs. 10000.00 from Y as State Goods and Service Tax and Rs.10000.00 as Central Goods and service Tax.
At the time of payment of tax X will deduct SGST paid on his purchases from the SGST payable by him and also deduct the CGST paid by him on his purchases from the CGST payable by him hence he will deposit Rs.2000.00 as SGST to state exchequer and Rs. 2000.00 to central exchequer.
Now if Y again sells the same goods at Rs. 1, 10,000.00 to Z (Consumer) of same state then again he will charge Rs.11000.00 as SGST and Rs.11000.00 as CGST. Since he has paid Rs. 10000.00 each under SGST and CGST on his purchases hence he will deposit Rs. 1000.00 as SGST and another Rs. 1000.00 as CGST.
Now see how much Tax is deposited as SGST:-
| Description |
Amount Deposited |
| Amount Deposited by initial seller by collecting Tax from X |
8000.00 |
| Amount deposited by X as explained above |
2000.00 |
| Amount deposited by Y as explained above |
1000.00 |
| Total revenue as SGST |
11000.00 |
See SGST as deposited from various point is Rs. 11000.00 which is equal to the tax paid by the consumer on his purchases i.e. Z the consumer has purchased the Goods for Rs. 1,10,000.00 by paying the Tax of Rs. 11000.00 as explained above.
The same calculation can be made for CGST.
Following points are clear from above:-
| 1. Both SGST and CGST is payable on a each transaction of sale of Goods. |
| 2. Set off of SGST paid on purchases can be taken from SGST payable on sale of Goods. |
| 3. Inter head set off will not be allowed i.e. SGST will not be set off against CGST and CGST will not be set off against SGST. |
Further Same type of treatment will be given for provision of services and set off of tax paid for services used for selling or manufacturing of goods and tax paid on goods used while providing the services are also allowed.
Note: We will take another point for discussion in our next issue in a day or two.
CA Sudhir Halakhandi
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