Question

A manufacturer marks an article for Rs 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 and at each stage the GST is 12%.
Calculate the amount of GST received by the Government from :
(i) the wholesaler (ii) the retailer

Answer 1

Step 1: Given information:

The marked price of an article by the manufacturer$=\mathrm{Rs}.5,000$
Discount given by the manufacturer$=25\%$
Rate of GST $=12\%$

Step 2: Calculate cost price and selling price for wholesaler

The cost price for the wholesaler is computed as:
$$\begin{gathered} \mathrm{Cost}\mathrm{price}=5,000-\left(5,000\times \frac{25}{100}\right) \\ \Rightarrow \mathrm{Cost}\mathrm{price}=5,000-1,250 \\ \Rightarrow \mathrm{Cost}\mathrm{price}=\mathrm{Rs}.3,750 \end{gathered}$$

Since, the wholesaler sells it to a retailer at a discount of 15% on the marked price.

The selling price for the wholesaler is computed as:
$$\begin{gathered} \mathrm{Selling}\mathrm{price}=5,000-\left(5,000\times \frac{15}{100}\right) \\ \Rightarrow \mathrm{Selling}\mathrm{price}=5,000-750 \\ \Rightarrow \mathrm{Selling}\mathrm{price}=\mathrm{Rs}.4,250 \end{gathered}$$

Step 3: Amount of GST paid by a wholesaler:

$$\begin{gathered} \mathrm{GST}=(\mathrm{S}.\mathrm{P}-\mathrm{C}.\mathrm{P})\times \mathrm{GST}\mathrm{rate} \\ \Rightarrow \mathrm{GST}=(4,250-3,750)\times \frac{12}{100} \\ \Rightarrow \mathrm{GST}=500\times \frac{12}{100} \\ \Rightarrow \mathrm{GST}=\mathrm{Rs}.60 \end{gathered}$$

Step 4: Amount of GST paid by the retailer:

The cost price of the article $=\mathrm{Rs}.4,250$

Since, the retailer sells it to a consumer at the marked price.

The selling price of the article $=\mathrm{Rs}.5,000$

GST paid by the retailer :

$$\begin{gathered} \mathrm{GST}=(\mathrm{S}.\mathrm{P}-\mathrm{C}.\mathrm{P})\times \mathrm{GST}\mathrm{rate} \\ \Rightarrow \mathrm{GST}=(5,000-4,250)\times \frac{12}{100} \\ \Rightarrow \mathrm{GST}=750\times \frac{12}{100} \\ \Rightarrow \mathrm{GST}=\mathrm{Rs}.90 \end{gathered}$$

Hence, the GST received by the Government from the wholesaler is Rs. 60 and from the retailer is Rs. 90.