Example of GST

Let us try to understand the revenue sharing methodology between the Centre and State with the help of an 
example.


Suppose that goods worth ` 10,000 are sold by manufacturer A from Maharashtra to Dealer B in Maharashtra.
Dealer B resells them to Trader C in Rajasthan for ` 17,500. Suppose the applicable tax rates for the goods sold are
CGST= 9%, SGST=9%, and IGST=9+9=18%.
Since A is selling this to B in Maharashtra itself, it is an intra-state sale and so, CGST@9% and SGST@9% will apply.
Dealer B (Maharashtra) is selling to Trader C (Rajasthan). Hence, this is an interstate sale, with IGST@18%. Trader
C (Rajasthan) is selling to end user D also in Rajasthan. Once again, it is an intra-state sale and hence, CGST@9%
and SGST@9% will apply.
GST being a consumption-based tax the state where the goods were consumed(Rajasthan) will receive GST.
By that logic, Maharashtra (where goods were sold) should not get any taxes. State Rajasthan and Central
Government should have got (30,000*9%) = 2,700 each. Thus, Maharashtra (exporting state) will have to transfer
credit of SGST of ` 900 (used in payment of IGST) to the Centre. [Any IGST credit will first be applied to set off in this
order: First set off against IGST liability, then CGST and the balance credit will be used to set off SGST]

In turn, Central Government will transfer to state Rajasthan (importing state) ` 450 IGST.

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Hi, Myself CMA Mousam Roy having more than 5 years experience in commerce field,teaching field as well as professional field with working with PSU and big Firm.