If you read our last post, you know that it’s crucial to register your business for GST. On registration, you would be assigned a GST number also referred to as GSTIN.
Now what do you do? How to charge taxes? Who pays the taxes? Does it impact profits?
Don’t worry! We will help you understand:
- Remember that GST does not change your profit margin.
- The tax rate is decided based on the product. This could be any of 0%, 3%, 5%, 12%, 18% or 28%. Shop101 app will automatically apply the right tax rate for you.
- The taxes are added to the price and collected from the customer.
- Finally, you as the merchant deposit the taxes with the government at the end of every month.
Let’s see an example:
- You procure a product from the wholesaler at Rs.600. You now want to sell it for Rs.1000. Your profit is Rs.400.
- Let’s say a tax rate of 18% is added to the price you charge your customer. This means if the sale price is Rs.1000, the GST charged on that price is Rs.180.
- You will receive the sale price + GST= Rs.1180 from the customer.
- At the end of every month you need to file your taxes with the government and pay the Rs.180 that is owed to them for this transaction.
Isn’t that simple and easy?