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Question

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, MP=5000

Rate of discount by the manufacturer, d1%=25%onMP

Rate of discount by the wholesaler, d2%=15%onMP

Selling Price of the retailer, SP3=MP

Rate of GST, GST%=12%

Step 2: Find the amount inclusive of tax (under GST) that the wholesaler pays for the article.

(i) Selling Price of manufacturer, SP1=MP-d1%xMP

=5000-25100×5000=5000-1250=3750

The price paid by wholesaler (including GST) =SP1+GST%xSP1

=3750+12100×3750=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, SP2=MP-d2%xMP

=5000-15100×5000=5000-750=4250

The price paid by the retailer (including GST) =SP2+GST%xSP2

=4250+12100×4250=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.

CGST%=SGST%=GST%2

=122=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.

InputSGSTofwholesaler=InputCGSTofwholesaler=SGST%ofSP1

=6100×3750=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.

OutputSGSTofwholesaler=OutputCGSTofwholesaler=SGST%ofSP2

=6100×4250=255

Tax paid by the wholesaler to the Central Government (under GST)

=OutputCGSTofwholesaler-InputCGSTofwholesaler

=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.

InputSGSTofretailer=InputCGSTofretailer=SGST%ofSP2

=6100×4250=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.

OutputSGSTofretailer=OutputCGSTofretailer=SGST%ofSP3

=6100×5000=300

Tax paid by the retailer to the State Government (under GST)

=OutputSGSTofretailer-InputSGSTofretailer

=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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