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GST WILL SAVE YOUR MONEY

The government has a deadline of 1st July 2017 for implementation of GST. GST will drop the price of a product because it has Input Credit benefit at all levels say from Manufacturer to Retailer . Let’s understand if GST is get implemented, how will your spending pattern change with a practical problem.

Working Example of GST vs Current Tax System
(INR) Current System  GST
Manufacturer
Cost of Goods 0 0
Add: Value Addition 10000 10000
Basic price 10000 10000
 Add: CENVAT@12.5% 1250 0
Add: GST@18% 0 1800
Total price 11250 11800
Wholesaler/distributor
Cost of Goods 11250 11800
Less: input GST credit 0 -1800
Add: value addition 5000 5000
Basic price 16250 15000
Add: VAT @12.5% 2031 0
Add:GST@18% 0 2700
Total price 18281 17700
Retailer
Cost of Goods 18281 17700
Less: input VAT credit -2031 0
Less: input GST credit 0 -2700
Add: Value Addition 2000 2000
Basic price 18250 17000
Add: VAT @12.5% 2281 0
Add:GST@18% 0 3060
Total price paid by consumer 20530 20060
Total value added in the 17000 17000
Total taxes paid 3531 3060
Effective tax rate(% of value addition) 21 18

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