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Let’s go shopping to understand how GST helpsOverall RATE RATE (0.00)

GST

Let’s say you’ve gone to a cloth retailer’s store along with your daughter and your little one has liked a dress. The first question you will ask the retailer is ‘How much does the dress cost?’. Let’s assume the retailer says Rs. 207.63. This price is fixed under the non-GST regime. Do you know how much the same dress would cost in the GST regime? Rs. 166. You save almost a whopping 20% under the GST regime, which is Rs. 41.63.   

Let’s find out how by quickly going through the following table:

 

Non-GST
Regime

Post-GST
Regime

 

 

Manufacturer

 

 

 

 

Cost of dress (incl. of Rs. 10 taxes)

 100.00

 100.00

 

 

Value added by Manufacturer

 25.00

 25.00

 

 

Gross Value of Dress

 125.00

 125.00

Effective Tax

 

Assume tax @ 10%

 12.50

 2.50

(12.50-10)

 

Cost to Wholesaler

 137.50

 125.00

 

 

Wholesaler

 

 

 

 

Margin

 25.00

 25.00

 

 

Gross Value of Dress

 162.50

 150.00

Effective Tax

 

Assume tax @ 10%

 16.25

 2.50

(15.00-12.50)

 

Cost to Retailer

 178.75

 150.00

 

 

Retailer

 

 

 

 

Margin

 10.00

 10.00

 

 

Gross Value of Dress

 188.75

 160.00

Effective Tax

 

Assume tax @ 10%

 18.88

 1.00

(16.00-15.00)

 

 

 

 

 

 

COST TO CUSTOMER

 207.63

 166.00

 

 
 

UNDER GST YOU SAVE ON YOUR DRESS

Rs. 41.63

 

 

 

 

TOTAL TAXES PAID

 Rs. 57.63

 Rs. 16.00

 

 

 

 

(Note: This is an example with imaginary numbers created just for facilitating easier understanding of GST benefits)

In simple words, as seen in the table above, under the GST regime, you are not taxed on taxes already paid. In fact, at each level, the intermediary can become the beneficiary of the taxes paid by the previous intermediary through availing exemption. Consequently, the cost at which the DRESS reaches YOU, the CUSTOMER is just Rs. 166. This is just not the case in the non-GST regime where taxes are calculated on an already taxed amount at each level of intermediation. This is just a small example. Just imagine the impact GST can have on inflation in the long run through such a powerful tax regime.

To know more about GST, write us at investmentz@acm.co.in or give a missed call at 08010968308      

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