A manufacturer marks an article at $₹ 5000$ . He sells it to a wholesaler at a discount of $25 %$ on the marked price and the wholesaler sells it to a retailer at a discount of $15 %$ on the marked price. The retailer sells it to a consumer at the marked price. If all the sales are intra state and the rate of GST is $12 %$ , find
(i) the amount inclusive of tax (under GST) which the wholesaler pays for the article.
(ii) the amount inclusive of tax (under GST) which the retailer pays for the article.
(iii) the amount of tax (under GST) which the wholesaler pays to the Central Government.
(iv) the amount of tax (under GST) which the retailer pays to the State Government.

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Solution

Step 1: Given data
Marked Price, $M P = ₹ 5000$
Rate of discount by the manufacturer, $d_{1} % = 25 % o n M P$
Rate of discount by the wholesaler, $d_{2} % = 15 % o n M P$
Selling Price of the retailer, $S P_{3} = M P$
Rate of GST, $G S T % = 12 %$
Step 2: Find the amount inclusive of tax (under GST) that the wholesaler pays for the article.
(i) Selling Price of manufacturer, $S P_{1} = M P - d_{1} % x M P$
$= 5000 - \frac{25}{100} \times 5000 = 5000 - 1250 = ₹ 3750$
The price paid by wholesaler (including GST) $= S P_{1} + G S T % x S P_{1}$
$= 3750 + \frac{12}{100} \times 3750 = 3750 + 450 = ₹ 4200$
Step 3: Find the amount inclusive of tax (under GST) that the retailer pays for the article.
(ii) Now, the wholesaler sells it to a retailer at a discount of 15% on the marked price.
∴ The Selling Price of the wholesaler, $S P_{2} = M P - d_{2} % x M P$
$= 5000 - \frac{15}{100} \times 5000 = 5000 - 750 = ₹ 4250$
The price paid by the retailer (including GST) $= S P_{2} + G S T % x S P_{2}$
$= 4250 + \frac{12}{100} \times 4250 = 4250 + 510 = ₹ 4760$
Step 4: Find the amount of tax (under GST) that the wholesaler pays to the Central Government.
(iii) According to the question, the sales are intrastate that is why the tax will be given by the seller as the Central Goods and Services Tax (CGST)% and State Goods and Services Tax (SGST)% to the Central and State government respectively.
∴ $C G S T % = S G S T % = \frac{G S T %}{2}$
$= \frac{12}{2} = 6 %$
The amount of SGST and CGST collected by the manufacturer (seller) from the wholesaler (buyer) is the input SGST and CGST of the wholesaler.
$I n p u t S G S T o f w h o l e s a l e r = I n p u t C G S T o f w h o l e s a l e r = S G S T % o f S P_{1}$
$= \frac{6}{100} \times 3750 = ₹ 225$
Now, the amount of SGST and CGST collected by the wholesaler (seller) from the retailer (buyer) is the output SGST and CGST of the wholesaler.
$O u t p u t S G S T o f w h o l e s a l e r = O u t p u t C G S T o f w h o l e s a l e r = S G S T % o f S P_{2}$
$= \frac{6}{100} \times 4250 = ₹ 255$
Tax paid by the wholesaler to the Central Government (under GST)
$= O u t p u t C G S T o f w h o l e s a l e r - I n p u t C G S T o f w h o l e s a l e r$
$= 255 - 225 = ₹ 30$
Step 5: Find the amount of tax (under GST) that the retailer pays to the State Government.
(iv) Now, the amount of SGST and CGST collected by the wholesaler (seller) from the retailer (buyer) is the input SGST and CGST of the retailer.
$I n p u t S G S T o f r e t a i l e r = I n p u t C G S T o f r e t a i l e r = S G S T % o f S P_{2}$
$= \frac{6}{100} \times 4250 = ₹ 255$
Now, the amount of SGST and CGST collected by the retailer (seller) from the consumer (buyer) is the output SGST and CGST of the retailer.
$O u t p u t S G S T o f r e t a i l e r = O u t p u t C G S T o f r e t a i l e r = S G S T % o f S P_{3}$
$= \frac{6}{100} \times 5000 = ₹ 300$
Tax paid by the retailer to the State Government (under GST)
$= O u t p u t S G S T o f r e t a i l e r - I n p u t S G S T o f r e t a i l e r$
$= 300 - 255 = ₹ 45$
Final Answer:
(i) The amount inclusive of tax that the wholesaler pays for the article is $₹ 4200$ .
(ii) The amount inclusive of tax that the retailer pays for the article is $₹ 4760$ .
(iii) The amount of tax that the wholesaler pays to the Central Government is $₹ 30$ .
(iv) The amount of tax that the retailer pays to the State Government is $₹ 45$ .

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