Question

The printed price of a bedsheet is $₹2500$. A wholesaler in Karnataka buys the bedsheet from a manufacturer in Punjab at a discount of $12\%$ on the printed price. The wholesaler sells the bedsheet to a retailer in Jharkhand at $32\%$ above the marked price. If the rate of GST on the bedsheet is $5\%$, find

(i) the price inclusive of tax (under GST) which the wholesaler bought the bedsheet.

(ii) the price inclusive of tax (under GST) at which the retailer bought the bedsheet.

(iii) the tax (under GST) paid by the wholesaler to the Government.

(iv) the tax (under GST) received by the Central Government.

Answer 1

Step 1: Given data

Marked Price, $MP=₹2500$

Rate of discount by the manufacturer, $d\%=12\%onMP$

Selling Price of the wholesaler, $S{P}_2=32\%aboveMP$

Goods and Services Tax, $GST\%=5\%$

Step 2: Find the price inclusive of tax (under GST) for which the wholesaler bought the bedsheet.

(i) Selling Price of the manufacturer, $S{P}_1=MP-d\%ofMP$

$$\begin{gathered} =2500-\frac{12}{100}\times 2500 \\ =2500-300 \\ =₹2200 \end{gathered}$$

The price paid by the wholesaler (including IGST) $=S{P}_1+GST\%ofS{P}_1$

$$\begin{gathered} =2200+\frac{5}{100}\times 2200 \\ =2200+110 \\ =₹2310 \end{gathered}$$

Step 3: Find the price inclusive of tax (under GST) at which the retailer bought the bedsheet.

(ii) Now, the wholesaler sells it to a retailer at $32\%$ above the marked price

∴ The Selling Price of the wholesaler, $S{P}_2=MP+32\%ofMP$

$$\begin{gathered} =2500+\frac{32}{100}\times 2500 \\ =2500+800 \\ =₹3300 \end{gathered}$$

The price paid by the retailer (including GST) $=S{P}_2+GST\%ofS{P}_2$

$$\begin{gathered} =3300+\frac{5}{100}\times 3300 \\ =3300+165 \\ =₹3465 \end{gathered}$$

Step 4: Find the tax (under GST) paid by the wholesaler to the Government.

(iii) According to the question, all the sales among the manufacturer, wholesaler and retailer are interstate due to which the tax will be paid as Integrated Goods and Services Tax (IGST) to the Central government by the seller as it is applied to interstate sales of goods and services. IGST% is always equal to the GST%.

Here, Output IGST of the wholesaler is the tax amount collected by the wholesaler from the retailer and Here, Input IGST of the wholesaler is the tax amount paid by the wholesaler to the manufacturer.

∴ Tax paid by the wholesaler to the Government

$$\begin{gathered} =OutputIGSTofwholesaler-InputIGSTofwholesaler \\ =IGST\%ofS{P}_2-IGST\%ofS{P}_1 \end{gathered}$$

$$\begin{gathered} =\frac{5}{100}\times 3300-\frac{5}{100}\times 2200 \\ =\left(3300-2200\right)\times \frac{5}{100} \\ =1100\times \frac{5}{100} \\ =₹55 \end{gathered}$$

Step 5: Find the tax (under GST) received by the Central Government.

(iv) Output IGST of the wholesaler (last seller) is the tax amount received by the Central Government.

Tax received by the Central Government $=OutputIGSTofwholesaler$

$=GST\%xS{P}_2$

$$\begin{gathered} =\frac{5}{100}\times 3300 \\ =₹165 \end{gathered}$$

Final Answer:

(i) The price of the bedsheet paid by the wholesaler (including IGST) is $\mathbf{₹}\mathbf{}\mathbf{2310}$.

(ii) The price of the article paid by the retailer (including IGST) is $\mathbf{₹}\mathbf{}\mathbf{3465}$.

(iii) The amount of tax paid by the wholesaler as Integrated Goods and Services Tax is $\mathbf{₹}\mathbf{}\mathbf{55}$.

(iv) The amount received by the Central Government as tax is $\mathbf{₹}\mathbf{}\mathbf{165}$.