CMA Intermediate · Direct and Indirect Taxation · Concept of Indirect Taxes
Aarav Traders sells goods to a customer for a base price of ₹50,000 plus GST at 18%. Aarav deposits the GST collected with the Government. Which statement is correct?
GST is 18% of ₹50,000, which is ₹9,000. The impact falls on Aarav as the supplier who must deposit it, but the incidence, or final burden, falls on the customer who pays it through the invoice price.
- AImpact of tax is on the customer and incidence is on Aarav, ₹9,000
- BImpact and incidence are both on Aarav, ₹9,000
- CImpact is on Aarav and incidence is finally on the customer, ₹9,000Correct
- DImpact is on Aarav and incidence is finally on the customer, ₹5,000
Explanation
GST = 18% × 50,000 = ₹9,000. Aarav is the person legally liable to pay the Government (impact), but he recovers the amount from the customer through the invoice, so the final burden (incidence) rests on the customer. ₹5,000 wrongly uses 10%.
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