Question

The cost of an article is Rs 6,000 to a distributor. He sells it to a trader for Rs 7,500 and the trader sells it to a customer for Rs 8,000. If the GST rate is 18%; find the GST paid by the:

(i) distributor.

(ii) trader.

Answer 1

Step 1: Given information:

Cost of article for distributor$=\mathrm{Rs}.6,000$

Cost of article for trader$=\mathrm{Rs}.7,500$

Cost of article for customer$=\mathrm{Rs}.8,000$

Rate of GST$=18\%$

Step 2: Find GST paid by distributor:

The cost price of the article $=\mathrm{Rs}.6,000$

Then,

$\begin{array}{rcl}\mathrm{Tax}\mathrm{paid}& =& 18\%\mathrm{of}6,000\\ & =& 6000\times \frac{18}{100}\\ & =& \mathrm{Rs}1,080\end{array}$

The selling price of the article for the distributor $=\mathrm{Rs}.7,500$

$\begin{array}{rcl}\mathrm{Tax}\mathrm{paid}& =& 18\%\mathrm{of}7,500\\ & =& 7,500\times \frac{18}{100}\\ & =& \mathrm{Rs}.1,350\end{array}$

GST paid by the distributor is calculated as,

$\begin{array}{rcl}\mathrm{GST}\mathrm{paid}\mathrm{by}\mathrm{distributor}& =& \mathrm{Tax}\mathrm{recovered}\mathrm{on}\mathrm{sale}-\mathrm{Tax}\mathrm{paid}\mathrm{on}\mathrm{purchase}\\ & =& 1350-1080\\ & =& \mathrm{Rs}.270\end{array}$

Step 3: Find GST paid by a trader:

The cost price of the article $=\text{Rs.}7,500$

$\begin{array}{rcl}\mathrm{Tax}\mathrm{paid}& =& 18\%\mathrm{of}7,500\\ & =& 7500\times \frac{18}{100}\\ & =& \mathrm{Rs}.1,350\end{array}$

The selling price of the article to the customer$=\mathrm{Rs}.8,000$

$$\begin{gathered} \mathrm{Tax}\mathrm{paid}=18\%\mathrm{of}8,000 \\ =8,000\times \frac{18}{100} \\ =\mathrm{Rs}.1,440 \end{gathered}$$

GST paid by the trader is calculated as,

$\begin{array}{rcl}\mathrm{GST}\mathrm{paid}\mathrm{by}\mathrm{trader}& =& \mathrm{Tax}\mathrm{recovered}\mathrm{on}\mathrm{sale}-\mathrm{Tax}\mathrm{paid}\mathrm{on}\mathrm{purchase}\\ & =& 1,440-1,350\\ & =& \mathrm{Rs}.90\end{array}$

Hence, the GST paid by the distributor is $\mathrm{Rs}.270$ and the GST paid by the trader is $\mathrm{Rs}.90$.