Problem Statement
A wholesaler in Uttar Pradesh buys an article from a manufacturer in Delhi at a list price of ₹$10,000$ at a discount of $20\%$. He sells it to a retailer in Madhya Pradesh at a profit of $25\%$ on his cost price. If the rate of GST is $12\%$, calculate:
(i) The tax paid by the wholesaler to the Central Government.
(ii) The total price paid by the retailer in Madhya Pradesh including IGST.
Verified Solution & Marking Scheme
Cost Price and Input Tax Credit (ITC)
List price $= ext{Rs } 10,000$. Discount $= 20\% \implies \text{CP} = 10000 - 2000 = ext{Rs } 8,000$.
Since manufacturer is in Delhi and wholesaler in UP (inter-state):
$$\text{Input IGST paid} = 12\% \text{ of } 8000 = ext{Rs } 960$$
$$\text{Input Tax Credit (ITC)} = ext{Rs } 960$$
Selling Price to Retailer
Profit $= 25\% \text{ of } 8000 = ext{Rs } 2,000$.
$$\text{Selling Price (SP)} = 8000 + 2000 = ext{Rs } 10,000$$
Output Tax and Net Tax Paid to Government
Sale from UP to MP is also inter-state:
$$\text{Output IGST collected} = 12\% \text{ of } 10000 = ext{Rs } 1,200$$
$$\text{Net Tax Paid by Wholesaler} = \text{Output IGST} - \text{Input IGST} = 1200 - 960 = ext{Rs } 240$$
$$\text{Total price paid by retailer} = 10000 + 1200 = ext{Rs } 11,200$$