GST on Profit or Total Sales Value?

[lakhya phukan]

Say, I bought an item from a whole seller at 5% GST. Total value was Rs. 105. So my input tax credit is Rs. 5. So if I sell the item for Rs. 190, then do I calculate the GST on 190 - 105 = 85 or on total sales values of Rs. 190? My GST rate is also 5%.

[Shilpi Jain]

You would have to mention GST on Rs. 190 in the invoice. However, while you are paying to the Govt. you end up paying on the margin only since the GST you already paid on your purchase can be set off. That is called input tax credit

[lakhya phukan]

So I have to deduct the input tax credit (which is Rs. 5) from the GST on Rs. 190?

[KASTURI SETHI]

NO. You are to pay GST on Rs.190/-. i.e. taxable value.

[Shilpi Jain]

So while filing returns you will actually pay gst on entire 190 but deposit in the cash ledger will be the amount of gst after reducing rs 5 itc.

[SIVARAMA KUMAR]

Assuming Rs.190 is your selling price the Margin would be ( 190-100) Rs.90 on which the net effect of GST will Operate. Your cost Rs ( 100+ 5) inclusive of ITC and your Selling price ( 190+5%) =199.5. The resultant tax liability will be equal to ( 9.5 - 5)= 4.5 which is 5% on your Margin that is Rs.90

[Nikita Rai]

GST is a tax on the value addition of goods or services. It is calculated on the selling price of goods or services, which includes the profit margin. The GST payable is calculated by multiplying the taxable value of the supply with the applicable GST rates. Therefore, GST is applicable on the total sales value, which includes the profit margin.

[Padmanathan KV]

You have to collect GST from customer at 5% on Rs.190 i.e. Rs. 9.5. On the other hand, if Rs.190 is inclusive of tax, then tax will be Rs.9.04 (190*5/105) (see Rule 35 of CGST Rules).

However, while paying GST to Govt u need to pay only OPT-IPT ie. 9.5 or 9.04 - 5 = 4.5 or 4.04.

AI Summary

Debate on GST Calculation: Should It Be Based on Profit Margin or Total Sales Value? Clarification on ITC Deduction. A discussion on the Goods and Services Tax (GST) focuses on whether GST should be calculated on the profit margin or the total sales value. A participant queries if GST should be based on the difference between the selling price and purchase price or the total sales value. Responses clarify that GST is applied to the total sales value, i.e., Rs. 190 in this case, but the input tax credit (ITC) of Rs. 5 can be deducted from the GST payable. The net GST payable is on the margin after accounting for ITC.