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CA Intermediate · Taxation · GST in India - An Introduction

Meera Textiles of Surat (Gujarat) supplies fabric to Kiran Garments of Jaipur (Rajasthan) for Rs 5,00,000 at 5% GST. Kiran Garments then sells the finished goods within Rajasthan to a retailer for Rs 8,00,000 at 12% GST. Kiran has no other transaction. Ignoring any ITC restriction and assuming Kiran uses IGST credit first as required, what is the total CGST plus SGST payable in cash by Kiran Garments on the second sale?

The cash payable is Rs 71,000. Output tax on the second sale is 12% of Rs 8,00,000, which is Rs 96,000. The Rs 25,000 IGST credit from the inter-State purchase is set off against CGST first, leaving Rs 23,000 CGST and Rs 48,000 SGST payable.

  1. ARs 96,000
  2. BRs 71,000Correct
  3. CRs 25,000
  4. DRs 35,000

Explanation

First sale is inter-State: IGST = 5% of 5,00,000 = 25,000, available as credit. Second sale is intra-State: output tax = 12% of 8,00,000 = 96,000 (CGST 48,000 + SGST 48,000). IGST credit is used first against IGST, then CGST, then SGST, so the 25,000 IGST credit reduces CGST liability to 23,000. Cash payable = 23,000 CGST + 48,000 SGST = 71,000. The 96,000 ignores the credit.

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