class xi chapter 2(g) Goods and Services Tax (GST): Concept and Characteristics

< GO TO CONTENT PAGE
< GO TO CHAPTER 2 (F) 

Goods and Services Tax (GST): Concept, Characteristics & Numericals

A complete guide for CBSE Class 11 Accountancy to master CGST, SGST, and IGST with practical examples.

Concept of GST
GST is a destination-based tax on the consumption of goods and services. It is proposed to be levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as setoff. In a nutshell, only value addition will be taxed and the burden of tax is to be borne by the final consumer. The concept of destination-based tax on consumption implies that the tax would accrue to the taxing authority which has jurisdiction over the place of consumption, which is also termed as the place of supply. GST has a dual aspect with the Centre and States simultaneously levying on a common tax base.

Components of GST

There are three main components of GST which are CGST, SGST, and IGST.

• CGST (Central Goods and Services Tax): Taxes collected under CGST will constitute the revenues of the Central Government.
• SGST (State Goods and Services Tax): A collection of SGST is the revenue of the State Government.
• IGST (Integrated Goods and Services Tax): IGST is charged on the transfer of goods and services from one state to another. Revenue collected under IGST is divided between the Central and State Government as per the rates specified by the Government. Import of goods and services is also covered under IGST.

Characteristics of Goods and Services Tax

• GST is a common law and procedure throughout the country under single administration.
• GST is a destination-based tax and levied at a single point at the time of consumption of goods and services by the end consumer.
• GST is a comprehensive levy and collection on both goods and services at the same rate with the benefit of input tax credit or subtraction of value.
• Minimum number of rates of tax does not exceed two.
• There is no scope for levy of cess, resale tax, additional tax, turnover tax, etc.
• There is no multiple levy of tax on goods and services, such as sales tax, entry tax, octroi, entertainment tax, or luxury tax, etc.

Practical Numericals: Let's Master the Calculations!

To understand how these taxes are applied in accounting, let's look at how the GST rates will be applicable if CGST is 9%, SGST is 9%, and IGST is 18% in different situations.

Problem 1: Intra-State Sale (Easy)
Goods worth ₹10,000 are sold by Manufacturer 1 in Maharashtra to Dealer A in Maharashtra. Calculate the invoice value.

Solution:
Since the buyer and seller are in the same state (Intra-State), CGST and SGST will apply.
Value of Goods: ₹10,000
Add: CGST @ 9% = ₹900
Add: SGST @ 9% = ₹900
Total Invoice Value = ₹11,800

Problem 2: Inter-State Sale (Medium)
Dealer A (from Maharashtra) sells goods worth ₹25,000 to Dealer B in Gujarat. Calculate the tax applicable.

Solution:
Since the goods are crossing state borders from Maharashtra to Gujarat (Inter-State), only IGST will apply.
Value of Goods: ₹25,000
Add: IGST @ 18% = ₹4,500
Total Invoice Value = ₹29,500

Problem 3: Another Intra-State Sale (Medium)
Dealer B (in Gujarat) now sells those goods to Sunita in Gujarat worth ₹30,000.

Solution:
The movement is within Gujarat, so it is an Intra-State transaction. We apply CGST and SGST.
Value of Goods: ₹30,000
Add: CGST @ 9% = ₹2,700
Add: SGST @ 9% = ₹2,700
Total Invoice Value = ₹35,400

Problem 4: Final Sale to Consumer Across States (Hard)
Sunita (in Gujarat) sells the goods to Ravindra in Rajasthan worth ₹65,000. Calculate the final bill amount.

Solution:
The goods move from Gujarat to Rajasthan. This is an Inter-State sale, attracting IGST.
Value of Goods: ₹65,000
Add: IGST @ 18% = ₹11,700
Total Invoice Value to Final Consumer = ₹76,700

Quick Summary Table for Students

Type of Movement	Taxes Applicable	Who gets the Revenue?
Intra-State (Within the same state)	CGST + SGST	Central Govt. + Respective State Govt.
Inter-State (From one state to another)	IGST only	Divided between Central and State Government

📚 Click Here to Explore More C BSE Class 11 Accountancy Notes!

GO TO CHAPTER 3