GST (Goods and Services Tax)

GST stands for Goods and Services Tax. It is a single indirect tax that replaced many earlier taxes such as VAT, service tax and excise duty. It is charged on the supply of goods and services, and the key idea is that it is levied on the value added at each stage of the supply chain. A manufacturer, a wholesaler and a retailer each pay tax only on the extra value they create, so the tax is not piled tax-upon-tax. GST is collected by the seller from the buyer and finally reaches the government. The person who actually bears the whole burden is the final customer.

Where the GST goes depends on whether the sale happens inside one state or between two states. If the buyer and seller are in the same state, it is an intra-state sale: the GST is split equally into Central GST (CGST) and State GST (SGST), so CGST = SGST = GST / 2. The centre keeps the CGST and the state keeps the SGST. If the buyer and seller are in different states, it is an inter-state sale: the whole tax is charged as a single Integrated GST (IGST), and CGST and SGST are both nil. The total amount of tax is the same either way; only the way it is divided differs.

When a dealer buys goods he pays GST on the purchase - this is his input tax. When he sells them he charges GST on the sale - this is his output tax. He does not hand the whole output tax to the government. Instead he subtracts the input tax he already paid and deposits only the difference. This rule is called Input Tax Credit, written as GST payable = output tax − input tax. Because of it, GST is effectively charged only on the value the dealer adds, and the same item is never taxed twice. If you add up the tax deposited by every dealer in the chain, the total equals the GST on the final selling price.

Most numericals follow the same steps. First find the taxable value: take the marked price and subtract any discount. Next decide intra-state or inter-state from the question. Compute the GST as rate times taxable value, then split it (CGST and SGST) or keep it whole (IGST). For supply-chain problems, compute each dealer's output tax on his selling price, subtract the input tax he paid on his cost price, and that difference is the GST he deposits. The amount a buyer finally pays is taxable value plus GST. Keeping the order - discount, taxable value, tax, credit - avoids almost every mistake.