Illustration 4: M/s Vinod & Company of Karnataka, who is the input service provider, charges Rs. 5,000 from M/s Rao company of Gokak, who is the output service provider

Illustration 4:

M/s Vinod & Company of Karnataka, who is the input service provider, charges Rs. 5,000 from M/s Rao & company of Gokak, who is the output service provider. M/s Rao & company further provides service to Krishna of Pune.

Compute amount of tax collected as CGST and SGST by the central and state government respectively. Assume GST is 18%.

Answer

This scenario involves two transactions within the Goods and Services Tax (GST) framework, with a specific focus on where the services are provided and received to determine the type of GST applicable.

The first transaction takes place between M/s Vinod & Company, located in Karnataka, and M/s Rao & Company, situated in Gokak. It's important to recognize that Gokak is also within the state of Karnataka.

Since both the input service provider (M/s Vinod & Company) and the output service provider (M/s Rao & Company) are located in the same state, this transaction qualifies as an intra-state supply.

For intra-state supplies, Central GST (CGST) and State GST (SGST) are levied. The service charge is Rs. 5,000, and the GST rate is 18%. This means CGST will be 9% (half of 18%) and SGST will also be 9%.

Therefore, M/s Vinod & Company will charge Rs. 450 as CGST (9% of Rs. 5,000) and Rs. 450 as SGST (9% of Rs. 5,000). The total amount charged by M/s Vinod & Company to M/s Rao & Company will be Rs. 5,000 + Rs. 450 (CGST) + Rs. 450 (SGST) = Rs. 5,900.

The second transaction involves M/s Rao & Company of Gokak (Karnataka) providing a service to Krishna of Pune (Maharashtra). Because the service provider and the service recipient are in different states, this transaction is considered an inter-state supply.

For inter-state supplies, Integrated GST (IGST) is levied instead of CGST and SGST. The problem does not provide the value of the service provided by M/s Rao & Company to Krishna, nor does it specify the amount of tax collected from Krishna.

Therefore, based on the information provided, we can only compute the tax implications of the first transaction.

Considering only the first transaction, the amount of tax collected as CGST by the central government is Rs. 450. Concurrently, the amount of tax collected as SGST by the state government (Karnataka) is also Rs. 450.

The problem only provides enough information to calculate the tax on the initial transaction between M/s Vinod & Company and M/s Rao & Company.