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) | ||||
| A | B | C | ||||
| Initial Value | 100 | 100 | 150 | |||
| Added Value | 0 | 50 | 50 | |||
| Total Value | 100 | 150 | 200 | |||
| IGST(%) | 0 | 0 | 0 | 0 | 0 | 0 |
| CGST(%) | 10 | 10 | 10 | 15 | 10 | 20 |
| SGST(%) | 10 | 10 | 10 | 15 | 10 | 20 |
| Final Bill Amount | 120 | 180 | 240 | |||
| Invoice To B | x | Invoice To C | x | Invoice to D | x | |
| ITEM | AMOUNT | ITEM | AMOUNT | ITEM | AMOUNT | |
| XYZ | 100 | XYZ2 | 150 | XYZ3 | 200 | |
| IGST(%) | 0 | IGST(%) | 0 | IGST(%) | 0 | |
| CGST(%) | 10 | CGST(%) | 15 | CGST(%) | 20 | |
| SGST(%) | 10 | SGST(%) | 15 | SGST(%) | 20 | |
| PAY | 120 | PAY | 180 | PAY | 240 | |
| INPUT | OUTPUT | INPUT | OUTPUT | INPUT | OUTPUT | |
| IGST Credit Ledger | 0 | 0 | 0 | 0 | 0 | 0 |
| CGST Credit Ledger | 0 | 10 | 10 | 15 | 15 | 20 |
| SGST Credit Ledger | 0 | 10 | 10 | 15 | 15 | 20 |
| Total | 0 | 20 | 20 | 30 | 30 | 40 |
| Final Tax | 20 | 10 | 10 | |||
| 40 |
In above example we see-
- Supply from Mr. A is the initial point of the production line. Meaning there is no sale or purchase happened before this point.
- 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.
- Mr. A raised a bill of Rs 100 + 20% (for this example) that is a total of Rs 120 to Mr. B.
- Mr. A added filing GST return.
- CSGT (Center) -> Rs.10 (10%)
- SGST (Delhi) -> Rs.10 (10%)
- Mr. B added Rs.50 to the initial value of 100. ( since GST is value addition tax, not tax on tax.)
- Mr. B raised a bill of Rs 150 + 20% that is a total of Rs 180 to Mr. C.
- Mr. B added filing GST return.
- 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.
- 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.
- Mr. C added Rs.50 to the initial value of 150. ( since GST is value addition tax, not tax on tax.)
- Mr. C raised a bill of Rs 200 + 20% that is a total of Rs 240 to Mr. D.
- Mr. C added filing GST return.
- 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.
- 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.
- 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.
- 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 A | Person B | Person C | ||||
| Initial Value | 100 | 100 | 150 | |||
| Added Value | 0 | 50 | 50 | |||
| Total Value | 100 | 150 | 200 | |||
| IGST(%) | 0 | 0 | 20 | 30 | 0 | 0 |
| CGST(%) | 10 | 10 | 0 | 0 | 10 | 20 |
| SGST(%) | 10 | 10 | 0 | 0 | 10 | 20 |
| Final Bill Amount | 120 | 180 | 240 | |||
| Invoice To B | ———— | Invoice To C | ————– | Invoice to D | ————– | |
| ITEM | AMOUNT | ITEM | AMOUNT | ITEM | AMOUNT | |
| XYZ | 100 | XYZ2 | 150 | XYZ3 | 200 | |
| IGST(%) | 0 | IGST(%) | 30 | IGST(%) | 0 | |
| CGST(%) | 10 | CGST(%) | 0 | CGST(%) | 20 | |
| SGST(%) | 10 | SGST(%) | 0 | SGST(%) | 20 | |
| PAY | 120 | PAY | 180 | PAY | 240 | |
| INPUT | OUTPUT | INPUT | OUTPUT | INPUT | OUTPUT | |
| IGST Credit Ledger | 0 | 0 | 0 | 30 | 10 | 0 |
| CGST Credit Ledger | 0 | 10 | 10 | 0 | 10 | 20 |
| SGST Credit Ledger | 0 | 10 | 10 | 0 | 10 | 20 |
| Total | 0 | 20 | 20 | 30 | 30 | 40 |
| Final Tax | 20 | 10 | 10 | |||
| 40 |