Question

A retailer buys a TV from a wholesaler for ₹20,000 and sells it to a consumer at a 10% profit. If the GST rate is 18%, calculate the total tax paid by the retailer to the Government.

Hint:

In GST, tax is paid only on value addition: Net GST = Output GST − Input GST (ITC).

Answer 1

Cost Price of TV
The retailer purchases the TV from the wholesaler for ₹20,000.

Selling Price of TV
The retailer sells the TV at a profit of 10%.
Profit = 10% of ₹20,000 = ₹2,000
Selling Price = ₹20,000 + ₹2,000 = ₹22,000

GST Charged on Sale
GST rate = 18%
GST on selling price = 18% of ₹22,000
GST = 0.18 × 22,000 = ₹3,960

GST Paid on Purchase (Input Tax Credit)
GST paid when purchasing from wholesaler = 18% of ₹20,000
GST = 0.18 × 20,000 = ₹3,600

GST Payable to Government
Tax payable = Output GST − Input GST
Tax payable = ₹3,960 − ₹3,600 = ₹360

Final Answer
The total tax paid by the retailer to the Government is ₹360.