How Will GST Work For Me

[King Dranzer]

I want to start a PC assembly business. How will GST work for me. I will have to get the components from a wholesale distributor assemble them and then sell it. In this case will the GST be applied twice once when I buy it from distributor and again when I sell it. Or will the GST that we paid to retailer be returned to us when we sale the item to consumer. Will the GST be applied at different levels or will it only be applied at single level.

Lets say the price of components is 20,000 on which distributor is adding 18% GST which makes it 23,600. When I sale it should I sell it for 26,600 in which the GST I paid will be reverted or should I add GST again to final product which makes it 30,600.

[MADAN RAHEJA]

In your business of assembly of PCs, falling under 4 digit code 8471, the product is leviable to CGST and SGST of 9% each for intra-state supplies or IGST of 18% for inter-state supplies. You are eligible for taking credit of GST borne by you on procurement of parts/components/services etc. used in assembly. The credit has to be taken in Electronic Credit Register. This credit can be used by you for payment of GST by you. In the example given by you, on the price of components of ₹ 20000, you have borne GST of ₹ 3600 which can be taken credit by you in appropriate head of CGST/SGST or IGST as the case may be. While discharging GST on your sale price say on Rs, 25000/-, your total GST liability would be ₹ 4500/- . You can pay it by debiting ₹ 3600/- from Credit account and paying balance in cash. However you cannot adjust credit of CGST against SGST and vice versa.

[King Dranzer]

That 20,000 is excluding the 18%GST that distributor will be including. So the PC cost will be 23,600.

[MADAN RAHEJA]

₹ 3600/- will be available to you as a Credit for paying GST on your sale price. Hence net GST payable by you would be on the value addition, while you would charging 18% GST on your full sale price. In the aforesaid example of basic sale price of ₹ 25000/- you would be collecting basic sale price of ₹ 25000/- plus GST of ₹ 4500/- i.e. a total of ₹ 29500/- from your customer.

AI Summary

Input tax credit allows assemblers to offset GST paid on components against output GST, reducing tax to value addition. GST is charged on the final supply at the applicable rate and registered assemblers may claim input tax credit for GST paid on components and services by recording it in the Electronic Credit Register and using it to discharge output tax; input credit cannot be adjusted between CGST and SGST, while IGST rules govern inter state supplies.