Chapter 7. Comparison between pre and post GST scenarios
Illustrated with an example of supply chain, consisting Manufacturer, Wholesaler, Retailer and Customer, showing the impact with and without GST:-
Suppose, manufacturer, started production for one item (say, one Dress), he had all the necessary things to manufacture dress. Now, Manufacturer must be having certain people known as wholesalers and further wholesalers will have retailers, so that item reaches to the end users (customers).
Following shown, the cost of saving by customer on one item after implementing GST:-
Case 1: Manufacturer to Wholesaler
| Particulars | Without GST | With GST |
| Cost of Production | 100 | 100 |
| Add:- Manufacturer Profit Margin | 100 | 100 |
| Manufacturer Price | 200 | 200 |
| Add:- Excise Duty (12%) | 24 | – |
| Total | 224 | 200 |
| Add:- VAT@12.5% | 28 | – |
| Add:- CGST@12.5 | – | 25 |
| Add:- SGST@12.5% | – | 25 |
| Invoice Value | 252 | 250 |
Case 2: Wholesaler to Retailer:-
| Particulars | Without GST | With GST |
| Cost of Goods to Wholesaler | 224 | 200 |
| Add:- Profit Margin @ 10% | 22.4 | 20 |
| Total | 246.4 | 220 |
| Add:- VAT@12.5% | 30.8 | – |
| Add:- CGST@12.5 | – | 27.5 |
| Add:- SGST@12.5% | – | 27.5 |
| Invoice Value | 277.2 | 275 |
Case 3: Retailer to Consumer:-
| Particulars | Without GST | With GST |
| Cost of Goods to Retailers | 246.4 | 220 |
| Add:- Profit Margin @ 10% | 24.64 | 22 |
| Total Value | 271.04 | 242 |
| Add:- VAT@12.5% | 33.88 | – |
| Add:- CGST@12.5 | – | 30.25 |
| Add:- SGST@12.5% | – | 30.25 |
| Total Price of item that reaches to customer | 304.92 | 302.5 |
| Cost Saving (in Rs) | – | 2.42 |
From the above example it is clear, that on one item, customer save Rs 2.42, on applying GST, while if we wish to continue with current taxation system, then not a single penny is saved by consumer.