Let’s go shopping to understand how GST helps

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

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.

No votes yet.
Please wait...

Leave a Reply

two + fourteen =

"Prevent unauthorized transactions in your trading and demat account- Update your mobile numbers/email IDs with your Stock Broker and Depository Participant. Receive information of your transactions directly from Exchange on your mobile/email at the end of day. Receive alerts on your Registered Mobile for all debits and other important transactions in your demat account directly from CDSL on the same day call us on 02228584545 Email : customerservice@acm.co.in

Copyrights @ 2013 Asit C Mehta Investment Interrmediates Ltd.(ISO 9001:2015 certified company)