How GST Works Between SGST CSGT IGTS | Interstate , Intrastate

Intrastate Transaction

Let us understand the working of GST with examples.

First we will understand the transaction between the intrastate sale and purchase.

In second we will understand the working of GST in interstate transaction, which between two states

In these two example we will try understand the authorities involved in the GST movement, what is credit ledger and how the amount is settle between these ledger inputs.

Later we will also discuss a loop hole in the system and try to understand what the Central Government did to fill that loophole.

Example 1 – Intrastate Transaction

Let us assume that there are 4 persons involved in a production line as

Mr. A – the seller of raw material, also the initiator of the production chain, he has not bought the material from anywhere and somehow posses it. Now he is willing to sell it and by doing so he will be the initiator of this chain.

Mr. B – he is a factory owner and producer of a good using the material supplied from Mr. A

Mr. C – he is a seller/distributer and sell final product to client.

Mr. D is the final recipient of the final product in this production chain.

We assume that all the transactions are taking place in one GST code ( 07 Delhi ) which means within one state – intrastate

Delhi (07)Delhi (07)Delhi (07)
ABC
Initial Value100100150
Added Value05050
Total Value100150200
IGST(%)000000
CGST(%)101010151020
SGST(%)101010151020
Final Bill Amount120180240
Invoice To BxInvoice To CxInvoice to Dx
ITEMAMOUNTITEMAMOUNTITEMAMOUNT
XYZ100XYZ2150XYZ3200
IGST(%)0IGST(%)0IGST(%)0
CGST(%)10CGST(%)15CGST(%)20
SGST(%)10SGST(%)15SGST(%)20
PAY120PAY180PAY240
INPUTOUTPUTINPUTOUTPUTINPUTOUTPUT
IGST Credit Ledger000000
CGST Credit Ledger 01010151520
SGST Credit Ledger 01010151520
Total 02020303040
Final Tax201010
40

In above example we see-

  1. Supply from Mr. A is the initial point of the production line. Meaning there is no sale or purchase happened before this point.
  2. There will be no GST credit for Mr. A, and Mr. A has decided to sell his raw material to Mr. B for Rs.100.
  3. Mr. A raised a bill of Rs 100 + 20% (for this example) that is a total of Rs 120 to Mr. B.
  4. Mr. A added filing GST return.
    1. CSGT (Center) -> Rs.10 (10%)
    2. SGST (Delhi) -> Rs.10 (10%)
  5. Mr. B added Rs.50 to the initial value of 100. ( since GST is value addition tax, not tax on tax.)
  6. Mr. B raised a bill of Rs 150 + 20% that is a total of Rs 180 to Mr. C.
  7. Mr. B added filing GST return.
    1. CGST (Center) -> 15 – 10 = 5 , as there is input credit of 10 in CGST Ledger. Now Total CGST Ledger credit of Mr C is 15.
    2. SGST (Delhi) -> 15 -10 = 5 , as there is input credit of 10 in SGST ( Delhi ) Ledger. Now Total Now Ledger credit of Mr. C is 15.
  8. Mr. C added Rs.50 to the initial value of 150. ( since GST is value addition tax, not tax on tax.)
  9. Mr. C raised a bill of Rs 200 + 20% that is a total of Rs 240 to Mr. D.
  10. Mr. C added filing GST return.
    1. CGST (Center) -> 20 – 15 = 5 , as there is input credit of 15 in CGST Ledger. Now Total CGST Ledger credit of Mr D is 15.
    2. SGST (Delhi) -> 20 -15 = 5 , as there is input credit of 15 in SGST ( Delhi ) Ledger. Now Total Now Ledger credit of Mr. D is 15.
  11. Since Mr. D is a final consumer and he will not have any GST number, and will not file any GST return so we can say Mr. D will have to pay the final amount of the bill which is Rs. 240.
  12. In Conclusion the total tax collected in various steps in Rs. 40 which is 20% of 200.

Interstate Transaction

Delhi (07)Delhi (07)Haryana (06)
Person APerson BPerson C
Initial Value100100150
Added Value05050
Total Value100150200
IGST(%)00203000
CGST(%)1010001020
SGST(%)1010001020
Final Bill Amount120180240
Invoice To B————Invoice To C————–Invoice to D————–
ITEMAMOUNTITEMAMOUNTITEMAMOUNT
XYZ100XYZ2150XYZ3200
IGST(%)0IGST(%)30IGST(%)0
CGST(%)10CGST(%)0CGST(%)20
SGST(%)10SGST(%)0SGST(%)20
PAY120PAY180PAY240
INPUTOUTPUTINPUTOUTPUTINPUTOUTPUT
IGST Credit Ledger 00030100
CGST Credit Ledger 0101001020
SGST Credit Ledger 0101001020
Total 02020303040
Final Tax201010
40

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