Does GST is calculated on previous added GST for the same product GST will be on transaction value

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mack

Thinking-to-start-business

154 Points Joined November 2022

suppose I buy one product from person "A" on a purchase price 118/- in this 18 rupee is GST now I add my margin rupee 32/- on top of it and sell in the same state, so the selling price by me will be 150/- after adding 118 + 32.

now I have to pay 27/- which is 18% on this 150/- selling price as GST to the government.

and this is how it is said that "GST will be on transaction value".

But here person "A" gave 18/- as GST to the government and now I am giving 27/- as 18% of my selling price which also includes the previous GST part which is 18/- rupee so the government is getting GST not only on the product price but rather previously added GST part also which is added with the product price? so technically it is not correct but people say this is the way how GST are collected by the government.

Please explain to me if my understanding is wrong ?

Replies (4)

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

208967 Points Joined July 2016

Your understanding the GST is incomplete...

Person A charged GST of Rs.18/- to you.

Now when you sell the item and say you charge RS. 27 to your customer, you have to pay Rs. 9/- to Government, as Rs. 18 was already paid earlier, which is known as ITC (Input Tax Credit) for you.

Reena

Partner

221 Points Joined June 2017

The final burden of all the tax is on the consumer, as GST is consumption tax. Rs 18 which you paid to your supplier has already been paid to the government. As far as your supplier is concerned, you are the "consumer". But if you add value and sell it further, you are no longer the consumer. You will charge Rs 27 from your customer, but you will only pay Rs 9 to the government, as Rs 18 has already been paid. This Rs 18 will show against your GST number as ITC (input Tax Credit) and your liability will only be Rs 9.

Now suppose the person you sell it to is not a consumer but also a business, then you will enter their GST number in your returns and Rs 27 will show as their ITC. So if they sell it further, they will only pay the amount which is over Rs 27 to the government.

This is how GST works. You only pay tax on the value you added if you sell it further (or use material and make another product out of it and sell it). If you are the final consumer, you pay the whole tax which occurred along the supply chain of the product, right from raw materials.