Page 83 - Sphurana 2020-21 (4)

Stage 2: Distributor or service provider→ The next stage is the stage

where the goods are given to the distributors or service provider. The

distributor buys the same shirt for ₹1300 and adds on the value to that

shirt will be ₹1500 that is (₹ 1300+200) Under GST he will need to pay
tax around ₹75(5%) which again can be set off against the tax on the

purchased shirt from the manufacturer, that is ₹65. Now the actual tax

incidence under GST on the distributor will be 75-65=₹10.

Stage 3: Retailer → This is the second last stage where the retailer gets

the goods from the wholesaler or service provider. Taking the same

example, the retailer adds a margin of ₹100 on the purchase of a shirt.
The total cost of the product will become ₹1600(1500+100). Under

GST he will now need to pay tax (5%) that will become ₹80 that can

be set off by him against ₹75 tax paid by wholesaler. Now the tax
incidence under GST on the retailer is ₹5(80-75).

Stage 4: End Consumer → This amount of ₹1600 is borne by the

end consumer purchasing this shirt.
We can conclude that GST is a value added tax that provides benefits

of an input tax credit on every stage excluding the end consumer stage.

Hence, we can say that GST is “One Nation One Tax” providing
economic freedom to the traders.

Simran Maurya

II PU “D”

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