GST Liability Computation : Case Study with Example - Case Study 2

GST Liability : 

A registered Business (Proprietorship, Partnership Firm, or Corporate Entity) under GST department is authorized to collect tax from Customer/Buyer/Receiver of Goods and Services at the prescribed rate on behalf of the Goverment.

The Tax Collecting Business entity/Registered Dealer/Taxable Person must pay the collected GST amount to the GST Authority on or before notified due dates.

This Payable amount of GST is formally called 'GST Liability'.

The Sale of Goods or Services can also be termed as 'Outward Supply of Goods and Services'.

Who is authorized to Collect GST ?

A registered Taxable Person has the legal right to collect GST, whether it is a small Proprietorship, a Partnership Firm or a Large multinational Corporate Entity.

Note : Exceptional Case of a Taxable Person

A Registered Dealer operating as a Composition Taxable Person does not have the right to collect tax from Customer/Buyers. Instead, they pay a small flat amount of GST(1% to 6%) directly on their business turnover. Furthermore they issue a 'Bill of Supply' in place of 'Tax Invoice'.

Formula for GST Liability Computation :

GST Payable = Net Output GST - Net Input GST (If Output GST is greater than Eligible Input GST)

 or

Net GST Liability = Net Output GST - Net Eligible ITC(Input Tax Credit) 

In very simple words Meaning of ,

Output GST is GST collected on Sale of Goods and Services.

Input GST is GST paid on Purchase of Goods and Services. Input GST is also termed as Input Tax Credit(ITC)

Case Study 2 : Where a Taxable person has both Inward Supply and Outward Supply.

Explanation : 

Mohanlal Auto Works, Mumbai, Maharashtra (Nature of Business is Automobile Repairing Service)

Rendered repairing Service to Arjun Saha, Mumbai, Maharashtra for ₹92,630(Taxable Value ₹78,500/- CGST ₹7,065/-  SGST ₹7,065/-) inclusive of GST@18% for the month of May 2026.

Used Spare parts for the above repairing service for ₹42,952(Taxable Value ₹36,400/-, CGST ₹3,276/-  SGST ₹3,276) inclusive of GST@18% for the month of May 2026. 

Purchased Spare parts from Priyanka Auto Agency, Pune, Maharashtra for ₹35,990(Taxable Value ₹30,500/-, CGST ₹2,745/-  SGST ₹2,745) inclusive of GST@18% for the month of May 2026. 

All the above three transactions are Intra-State transactions(within a same State). Because the Service Provider Mohanlal Auto Works belongs to the Indian State Maharashtra and the Service receiver Arjun Saha also belongs to same state Maharashtra.

And Mohanlal Auto Works, Mumbai, Maharashtra purchased spare parts from vendor/supplier Priyanka Auto Agency, Pune who belongs to the same state Maharashtra.    

GST Liability computation method is mentioned below.

Since all the above parties Service Provider, Service receiver, Vendor/Supplier of Spare parts belong to the same State Maharashtra, CGST and SGST are applicable.

The Final Total GST amount payable is ₹15,192/-

Break up for the total GST amount Payable is CGST share ₹7,596/- and SGST share  ₹7,596/-.      

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