M/s Vijay works registered in the state of Maharashtra, provides following details for the month of August. Calculate its net Tax Liability for the month of August 2023.

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Understand the Problem

The question is asking to calculate the net tax liability for a business based on provided transactions during a specific month, applying GST rates to sales, purchases, and services.

Answer

The net tax liability is ₹(-54,950).
Answer for screen readers

The net tax liability for M/s Vijay for the month of August 2023 is ₹(85,200 + 2,30,400 - 3,55,200 - 15,350) = ₹(85,200 + 2,30,400 - 3,70,550) = ₹(3,15,600 - 3,70,550) = ₹(-54,950).

Steps to Solve

  1. Calculate Total Sales Tax

    For the sales made, calculate the GST for each transaction.

    • Sold Goods @ 5% GST: [ 3,60,000 \times 0.05 = 18,000 ]

    • Sold Goods @ 28% GST: [ 2,40,000 \times 0.28 = 67,200 ]

    • Total Sales Tax = ( 18,000 + 67,200 = 85,200 )

  2. Calculate Total Purchase Tax

    For the purchases made, calculate the GST for each transaction.

    • Purchased goods @ 12% GST: [ 8,60,000 \times 0.12 = 1,03,200 ]

    • Purchased goods @ 28% GST: [ 9,00,000 \times 0.28 = 2,52,000 ]

    • Total Purchase Tax = ( 1,03,200 + 2,52,000 = 3,55,200 )

  3. Calculate Total Service Tax from Provided Services

    Calculate the GST for the services provided.

    • Provided Services @ 18% GST: [ 4,80,000 \times 0.18 = 86,400 ]

    • Provided Services @ 12% GST: [ 12,00,000 \times 0.12 = 1,44,000 ]

    • Total Service Tax = ( 86,400 + 1,44,000 = 2,30,400 )

  4. Calculate Total Tax Credits on Services Availed

    Calculate the GST for the services availed.

    • Availed Services @ 18% GST: [ 70,000 \times 0.18 = 12,600 ]

    • Availed Services @ 5% GST: [ 55,000 \times 0.05 = 2,750 ]

    • Total Tax Credits = ( 12,600 + 2,750 = 15,350 )

  5. Calculate Net Tax Liability

    The net tax liability can be calculated as follows:

    [ \text{Net Tax Liability} = \text{Total Sales Tax} + \text{Total Service Tax} - \text{Total Purchase Tax} - \text{Total Tax Credits} ]

    Substituting the calculated values:

    [ \text{Net Tax Liability} = 85,200 + 2,30,400 - 3,55,200 - 15,350 ]

The net tax liability for M/s Vijay for the month of August 2023 is ₹(85,200 + 2,30,400 - 3,55,200 - 15,350) = ₹(85,200 + 2,30,400 - 3,70,550) = ₹(3,15,600 - 3,70,550) = ₹(-54,950).

More Information

The negative net tax liability indicates that M/s Vijay had a tax credit surplus for the month. This typically means that the business can carry forward this excess credit to offset future tax liabilities.

Tips

  • Failing to include all transactions in calculations.
  • Misapplying the GST rates on different categories of transactions.
  • Not simplifying the calculations properly.

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