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Goods and Service Tax (GST)

The Government of India introduced the Goods and Service Tax (GST) on 1st July 2017. GST is an
indirect tax levied on the supply of goods and services. In India, the government have categorised
major items into five tax slabs, i.e., 0%, 5%, 12%, 18% and 28%.

1. Most of the things of fundamental needs have been kept under 0% GST, i.e., they are tax-free.
Note: 2. Sales tax is always levied on the selling price of an item and is added to the value of the bill.
3. GST or Goods and Services Tax, is a single tax which is levied on the supply of goods or services
or both.

Before we start calculating GST, let us go through a few definitions:
• Consumer: A person who purchases goods and services is called a consumer.

• Goods: Physical objects which we buy from shops or online are called goods. For example,
food, stationery, clothing, etc.

• Services: Jobs for which we pay other people to perform them are called services. Services
provided by hotels, clubs, door delivery of foods, catering services, transport services, etc. are
come under this category.

Components of GST

There are 3 taxes applicable under this system: CGST, SGST and IGST.

• CGST: Collected by the Central Government on an intra-state sale, for example, a transaction
happening within Madhya Pradesh.

• SGST: Collected by the State Government on an intra-state sale, for example, a transaction
happening within Madhya Pradesh.
• IGST: Collected by the Central Government for inter-state sale, for example, a transaction
happening from Gujarat to Madhya Pradesh.
Let us understand it as follows.

Transaction Tax Share

Sale within the State CGST + SGST Revenue will be shared equally between the centre and the state.
Sale to another State IGST There will only be one type of tax (central) in case of inter-state
sales. The centre will then share the IGST revenue based on the
destination of the goods.
Example 17: A dealer in Gujarat had sold the goods to a dealer in Bihar worth `50,000. The tax
rate is 18%. Which type of GST would the dealer collect?

18
Solution: In this case the sale is inter-state, the dealer has to charge 18% of `50,000 = × ` 50 000
,
= `9,000 as IGST only and the revenue will go to the central government. 100
Example 18: A dealer in Uttar Pradesh sells goods to a consumer in Uttar Pradesh worth `75,000.
The GST rate on the goods is 28%. Compute the GST collected by the dealer.
Solution: In this case, the sale is within the state, rate comprises CGST at 14% and SGST at 14%.

The dealer has to collect 28% of `75,000 = `21,000 as GST, in which `10,500 as CGST will go to the
central government and `10,500 as SGST will go to the Uttar Pradesh government.

177 Comparing Quantities