Goods & Services Tax | PAPER III – ACCOUNTING & FINANCIAL MANAGEMENT FOR BANKERS | MODULE D: TAXATION AND FUNDAMENTALS OF COSTING
Goods & Services Tax (GST) and Taxation Concepts
Meaning of Direct and Indirect Tax
Taxes are the primary source of revenue for the government. Taxes are broadly categorized into:
- Direct Tax: Paid directly by individuals or organizations to the government. Examples include Income Tax and Corporate Tax.
- Indirect Tax: Collected by intermediaries (like retailers) from the consumer. Examples include GST, customs duty, and excise duty.
Example: Mr. A pays ₹50,000 as income tax – this is a Direct Tax. He also pays ₹180 GST on a shirt – this is an Indirect Tax.
Introduction to GST
GST (Goods and Services Tax) is a comprehensive indirect tax levied on the manufacture, sale, and consumption of goods and services across India. Introduced on 1st July 2017, GST subsumes various central and state taxes like VAT, Service Tax, Excise Duty, etc.
Features of GST:
- One Nation, One Tax
- Destination-based tax
- Dual GST model – levied by both Centre (CGST) and States (SGST) or IGST for interstate
- Input Tax Credit (ITC) mechanism for businesses
Types of GST
- CGST: Collected by the Central Government
- SGST: Collected by the State Government
- IGST: Collected by the Central Government for inter-state transactions
10 Medium-Hard Mathematical Examples on GST
- Mr. A sells goods worth ₹1,00,000 in Maharashtra. GST rate is 18% (CGST 9% + SGST 9%).
CGST = ₹9,000, SGST = ₹9,000, Total GST = ₹18,000 - Firm B purchases raw materials worth ₹60,000 + 18% GST and sells final goods worth ₹1,20,000 + 18% GST.
Input GST = ₹10,800, Output GST = ₹21,600, Net GST Payable = ₹10,800 - Goods sold from Delhi to Mumbai worth ₹5,00,000. IGST applicable @ 18%.
IGST = ₹90,000 - A firm purchased machinery worth ₹2,50,000 plus 18% GST. What is the input tax credit?
ITC = ₹45,000 - Service provided worth ₹1,50,000 with GST @12%. What is the tax amount and invoice total?
Tax = ₹18,000, Invoice Total = ₹1,68,000 - Mr. X receives a bill of ₹1,18,000 (inclusive of 18% GST). Find taxable value and GST.
Taxable Value = ₹1,00,000, GST = ₹18,000 - Sale of goods ₹2,40,000 with CGST@9%, SGST@9%. How much tax will be paid to each government?
CGST = ₹21,600, SGST = ₹21,600 - Retailer buys item at ₹1,000 + 18% GST and sells at ₹1,200 + 18% GST. What is net GST liability?
Input GST = ₹180, Output GST = ₹216, Net GST = ₹36 - Business A imports goods worth ₹4,00,000. IGST @18% applies.
IGST = ₹72,000 - A service provider renders ₹3,00,000 worth of services in Karnataka. GST @12% applies.
CGST = ₹18,000, SGST = ₹18,000
10 Multiple Choice Questions (MCQs)
-
Which of the following is a direct tax?
a) GST
b) Customs Duty
c) Income Tax
d) Excise Duty
Answer: c) Income Tax -
GST in India is implemented as a:
a) Single GST
b) Dual GST
c) Federal GST
d) State-only GST
Answer: b) Dual GST -
Who collects CGST?
a) State Government
b) Municipal Corporation
c) Central Government
d) GST Council
Answer: c) Central Government -
In case of intra-state supply, GST is divided into:
a) IGST only
b) CGST and SGST
c) SGST and IGST
d) CGST and IGST
Answer: b) CGST and SGST -
GST is applicable on which of the following?
a) Sale of land
b) Salary income
c) Manufacturing of goods
d) Agricultural income
Answer: c) Manufacturing of goods -
Which tax is levied on inter-state supply under GST?
a) CGST
b) SGST
c) IGST
d) VAT
Answer: c) IGST -
What is the full form of GST?
a) General Sales Tax
b) Goods and Services Tax
c) Gross Service Tax
d) Government Sales Tax
Answer: b) Goods and Services Tax -
If a retailer buys at ₹500 + 18% GST and sells at ₹600 + 18% GST, what is his GST liability?
a) ₹108
b) ₹90
c) ₹18
d) ₹0
Answer: c) ₹18 -
Which of the following is not merged into GST?
a) Service Tax
b) VAT
c) Income Tax
d) Excise Duty
Answer: c) Income Tax -
What is the GST rate if CGST is 9% and SGST is 9%?
a) 9%
b) 18%
c) 12%
d) 27%
Answer: b) 18%
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