There are various layers in pricing factors in India which are currently prevailing at every step of transfer of Goods and Services from manufacturer/service PROVIDER to the end consumer.

By taking an example, LET us understand that how the GST application will turn the scene for Indian consumers:-

Level 1:Manufacturer

Let's say, a Good of Rs. 100 including tax of Rs. 10 and all the RAW material. After the total manufacturing of that product he adds Rs. 30 to his value

Now the total gross value of the product will be 100+30 = Rs. 130

At an assumed tax RATE of 10%, the tax incurred upon the particular product will be thereby Rs. 13

But, here the twist of GST will be that the previous tax paid by him of Rs. 10 while taking the possession of raw materials would be waived off as a value chain

Therefore, the effective GST on the manufacturer will be applicable only 13-10 i.e. Rs. 3

Level 2:Wholesaler

Here the wholesaler obtains the product from the manufacturer for Rs. 130 and adds his margin of let's say Rs. 20

Now the gross value of the good would be jumped to 130 + 20 = Rs. 150

Here again, the tax applicability will be Rs. 15 as a 10% taxation rule but the GST regime will write off on his output i.e. Rs. 15 against the previously paid tax by the manufacturer of Rs. 13. So, therefore here again the GST regime will only applicable of 15-13 = Rs. 2

Level 3:Retailer

In this last stage, the retailer will take the product from the wholesaler from the given Rs. 150 and assume that he adds a value of Rs. 10 to his remuneration, MAKING the gross value of Rs. 160 (150+10). Now here, the tax applicability arises of Rs. 16 but the previous included tax paid by him of Rs. 15 in his last purchase from the wholesaler will put the tax liability dropped down to Rs. 1 only

Thus, from the new GST taxation scheme, the total tax arises from the transactions sums only Rs. 10+3+2+1 = Rs. 16.

There are various layers in pricing factors in India which are currently prevailing at every step of transfer of Goods and Services from manufacturer/service provider to the end consumer.

By taking an example, let us understand that how the GST application will turn the scene for Indian consumers:-

Level 1:Manufacturer

Let's say, a Good of Rs. 100 including tax of Rs. 10 and all the raw material. After the total manufacturing of that product he adds Rs. 30 to his value

Now the total gross value of the product will be 100+30 = Rs. 130

At an assumed tax rate of 10%, the tax incurred upon the particular product will be thereby Rs. 13

But, here the twist of GST will be that the previous tax paid by him of Rs. 10 while taking the possession of raw materials would be waived off as a value chain

Therefore, the effective GST on the manufacturer will be applicable only 13-10 i.e. Rs. 3

Level 2:Wholesaler

Here the wholesaler obtains the product from the manufacturer for Rs. 130 and adds his margin of let's say Rs. 20

Now the gross value of the good would be jumped to 130 + 20 = Rs. 150

Here again, the tax applicability will be Rs. 15 as a 10% taxation rule but the GST regime will write off on his output i.e. Rs. 15 against the previously paid tax by the manufacturer of Rs. 13. So, therefore here again the GST regime will only applicable of 15-13 = Rs. 2

Level 3:Retailer

In this last stage, the retailer will take the product from the wholesaler from the given Rs. 150 and assume that he adds a value of Rs. 10 to his remuneration, making the gross value of Rs. 160 (150+10). Now here, the tax applicability arises of Rs. 16 but the previous included tax paid by him of Rs. 15 in his last purchase from the wholesaler will put the tax liability dropped down to Rs. 1 only

Thus, from the new GST taxation scheme, the total tax arises from the transactions sums only Rs. 10+3+2+1 = Rs. 16.