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 $= ₹10,000$. Discount $= 20\% \implies \text{CP} = 10000 - 2000 = ₹8,000$.
Since manufacturer is in Delhi and wholesaler in UP (inter-state):
$\text{Input IGST paid} = 12\% \text{ of } 8000 = ₹960$
$\text{Input Tax Credit (ITC)} = ₹960$
Selling Price to Retailer
Profit $= 25\% \text{ of } 8000 = ₹2,000$.
$\text{Selling Price (SP)} = 8000 + 2000 = ₹10,000$
Output Tax and Net Tax Paid to Government
Sale from UP to MP is also inter-state:
$\text{Output IGST collected} = 12\% \text{ of } 10000 = ₹1,200$
$\text{Net Tax Paid by Wholesaler} = \text{Output IGST} - \text{Input IGST} = 1200 - 960 = ₹240$
$\text{Total price paid by retailer} = 10000 + 1200 = ₹11,200$