So, I will go to the government and ask them to deposit 100
rupees.
In this case, the manufacturer of 100 rupees will go to the
government and ask them to deposit 100 rupees.
It was a cost of 1000 rupees. It was a tax of 100 rupees.
Here is your 100 rupees tax.
Now, understand the second case.
The person who has purchased the goods from him, it is a
cost of 1000 rupees.
It is not a cost of 1100 rupees.
This is a very thought provoking point.
You have purchased goods from him and he is also a trader.
He is a trader.
For a trader, the cost of goods will be 1000 rupees.
The cost of goods will not be 1100 rupees.
Why will it not be?
You will understand the point in the next 2 minutes.
I am not explaining it now.
I will explain it after 2 minutes.
Assume that the cost of goods was 1000 rupees.
This person has put a profit margin in it.
He said that he will take a profit of 500 rupees.
What will be the cost of the goods? 1500 rupees.
Is this what happens in business?
He purchased goods for 1000 rupees and added a profit of
500 rupees.
And as I explained to you earlier,
Assume that the single rate of GST is 10% in the country.
So, how much tax will be imposed on it? 10%.
150 rupees.
What will be the cost of goods?
He will sell it for 1,650 rupees.
Is the point clear?
You may not be able to understand the point.
You may not be able to understand why the cost of goods is
1000 rupees.
He has made a payment of 1100 rupees to the other party.
So, how come the cost of goods is 1000 rupees?
Now, I will tell you what happens.
What will happen to this 150 rupees?
The customer will come to him and ask for the goods.
So, he will ask the customer to give him the goods for
1,650 rupees.
It will be written in the bill that the cost of goods is
1,500 rupees.
If you go to any shop to buy goods, clothes or shirts, it
is written there that the cost of goods is this much.
GST is this much.
Is it clear?
He sold the goods to the customer for 1,650 rupees.
He made a payment of 1,500 rupees to the customer.
Now, what will be the liability of this?
The output that he has to pay in tax.
How much will he have to pay in this case?
How much will the government have to deposit? 1,500 rupees.
He has to deposit 1,500 rupees.
But, as I told you, this is an indirect tax.
And the biggest feature of indirect tax is that you don't
have to deposit the tax from your pocket.
You can put the burden of that tax on the customer.
He has put the burden of 1,500 rupees on the customer.
He has taken 1,500 rupees from the customer.
Is it clear?
Now, the government benefits from this that it is a good
thing to deposit 1,500 rupees.
But, you take advantage of the fact that have you ever paid
any tax before?
This person will be asked, have you ever paid any tax
before?
When you sold the goods, when you sold the goods, you got a
tax liability of 1,500 rupees.
You took 1,500 rupees from the customer in the name of tax.
But, have you ever been a customer of anyone?
Because, your mother-in-law was also a daughter-in-law.
You must have also been a customer of someone.
You must have purchased from someone.
He will say, yes, I have.
So, how much tax did you pay?
He will say, I paid a tax of 100 rupees.
He will say, you paid a tax of 100 rupees.
Minus that 100 rupees here.
The tax that you have to deposit from your pocket, you have
to deposit a tax of 50 rupees.
That's it.
You have taken 1,500 rupees from the customer.
1,500 rupees will go in the account of the government.
It will be visible there.
But, am I giving 1,500 out of 1,500 from my pocket?
Out of 1,500 rupees, I am minusing 100 rupees which I have
paid tax on in the last stage.
In this case, only 50 rupees will go from my pocket.
This is the best feature of GST.
When you buy goods,
I am going to highlight this point in golden words.
Listen to this carefully.
Whatever goods you buy from someone in GST, if you have an
invoice, and you have also paid the tax for it,
In this case, you bought goods worth 1,000 rupees and gave
100 rupees in the name of GST.
You gave 1,100 rupees to the person you bought goods from.
So, the tax you are paying, you can take the input tax
credit for it.
The tax you must have paid at the time of purchase, you can
minus it from the final liability of the tax.
So, the benefit of this is that only 50 rupees will go from
your pocket.
This is a benefit given by the government that whatever GST
you give, you can minus it from your final tax liability.
Now, tell me,
I had given 1,100 rupees here.
What was the break-up of 1,100 rupees? 1,000 rupees is the
price of the goods.
And 100 rupees is mine, of GST.
Will my GST become a cost in this case?
Is it my cost?
Why will my GST become a cost?
The benefit of the GST that I am giving at the time of
purchase,
I will take it at the time of sale.
I will take its benefit here.
When I will sell,
I will collect a tax from my customer, which I have to pay
to the government.
But, the tax that I have to pay to the government of 1,100
rupees, the tax that I have given at the time of purchase,
I will also minus it.
So, how did my cost become?
My cost will become when I will not be able to minus it.
As it was in the old system.
This is why GST was brought.
Now, understand, what was the requirement to bring GST?
The requirement to bring GST was this only.
Earlier, all the taxes that used to happen in our country,
all the taxes that used to be there, either the central
government used to charge them, or the state government
used to charge them.
Now, the input tax,
I have told you to minus the taxes on the purchase.
All the taxes were not given the permission to be minused
in that case.
Look, I want to say that,
I want to say that, like the manufacturer, the manufacturer
had goods worth 1,000 rupees.
He imposed a 10% tax.
He was selling goods worth 1,100 rupees.
There were some taxes that you were not able to minus.
If the central government charged a tax, like excise, you
must have heard the name of excise duty.
If the central government charged excise duty,
then we would not get the credit from any other tax, like
the sale tax.
You would have to take the credit from excise only.
There were different taxes.
And all the taxes, like the service tax, you would get the
credit from the service tax.
You would not get the service tax credit from GST or the
sale tax.
In this case, he was selling goods worth 1,000 rupees.
And the government said that you would not get the credit
from the 10% tax.
So, what will happen now?
You purchased goods worth 1,000 rupees.
You paid 100 rupees tax.
You purchased goods worth 1,100 rupees.
And you know that you will not get the credit for that.
So, what will you do?
You will add the profit from your pocket.
How much will you show your cost?
If he is a trader, how much will the trader show his cost?
Obviously, he will not give the tax money from his pocket.
He will show the cost of the money he is paying.
How much will he show his cost?
He will show the cost of 1,100 rupees.
And how much tax will he add on this? 10% tax.
First, he will add his profit.
Assume that the profit is 500 rupees.
If it is 50%, then it will be 550 rupees.
So, how much will it be? 1,650 rupees.
He will add 10% tax on this.
165 rupees.
How much will it be? 5 and 1.
It will be 1,815 rupees.
Now, you can see what was the problem earlier.
I am not getting the credit for this.
You should understand this very carefully.
First, this is an old system.
What was going on earlier?
Earlier, I could not get the credit for some things.
I could not get the credit for all the things.
If I am paying the service tax, then I would get the credit
for the service tax only if there was an output liability
for the service tax.
If there was a liability for the sale tax, then I could not
get the credit for the service tax.
There were different types of taxes.
Try to understand what I am saying.
There were different types of taxes.
Even if you paid one tax during the purchase, you would not
get the credit for that during the sale.
It is not necessary.
You would get the credit.
If there was the same type of tax, then you would get the
credit.
If there is a service tax, then you would get the credit.
If you paid the sale tax, then you would get the credit.
But here, there is a service tax.
You are showing the sale tax in the output.
You would not get the credit for that.
This was the problem.
This is what I am discussing.
The government says, we don't give credit for this.
We don't give credit for this.
So the problem is that the payment of Rs.
1100, all that has become your cost.
And as soon as your cost became, look at this.
As soon as your cost of Rs.
1100 became, you spent that much profit.
You will take the entire profit of 50%.
And as soon as you took the entire profit, here the tax
rate of 10% also increased.
The thing which was at Rs.
1650 in the last example, the price of that thing increased
to Rs.
Are you seeing this?
For no reason, the cost of things increased.
Earlier, when we were discussing GST, that if you got the
credit, then the final price of Rs.
1650 would have come out.
The customer who went to the shop and bought the goods,
would have paid Rs.
If there was GST, then?
Earlier, what was happening?
Earlier, the customer would have paid Rs. 1815.
He would have paid Rs. 1815.
Forcibly, the price was increasing.
And if you try to understand the reason for the price
increase, what is the difference?
The difference is that those who are not giving you credit,
you purchased the goods.
At the time of purchase, some tax was paid.
Now you are doing sales.
You are doing sales.
At the time of sales, you want to pay a tax liability.
And you want that at the time of sales,
I should pay my tax.
At the time of purchase,
I should minus the tax I paid.
Earlier, this minus tax was not possible.
And because of this, tax was being imposed on tax.
Cascading effect of taxes was being imposed.
Do you understand the meaning of cascading effect of tax?
Try to understand what I am trying to say.
Cascading effect of tax means 10% is Rs.
Now if you think carefully in this example, then the tax of
Rs.
100 was being imposed on this tax as well.
Tax on tax as well.
How wrong is it?
Think about it.
How wrong is it to impose tax on tax?
How wrong is it?
I am paying tax of Rs. 100 here.
Now I am not getting credit for this Rs. 100.
So will this Rs.
100 be added to my cost here?
According to the law,
Rs. 1000 is equal to Rs. 100.
This is what it means.
And when I am imposing tax of 10% here, the 10% tax I am
imposing here, in that 10%,
Rs. 100 is also included.
What is this 10% basically?
Whose 10% is being imposed? 10% is Rs.
1000, plus Rs.
100, plus my profit of Rs.
See here,
Rs. 100 is being imposed on 10% tax.
Do you understand this chain?
Do you want to understand this chain?
If you understand this, you will understand the value of
GST.
What was the objective of bringing GST?
I gave a tax of Rs. 100.
I didn't get credit for it.
If I didn't get credit,
I added it to the cost.
When I added it to the cost, when I imposed a tax of 10% on
it, then a tax of 10% is being imposed on a tax of Rs.
See here, a tax is being imposed on a tax.
It is a matter of killing a poor man.
Nothing else is happening.
What was the wrong point?
The final customer was paying Rs.
1815, whereas he was paying Rs.
1650 in GST.
Sir, this was a big problem earlier.
At that time, people raised a concern.
They said, you have made so many indirect taxes, you have
made excise, you have made custom, you have made service
tax, you have made VAT, you have made central sale tax.
And there are such things that if you pay tax on one,
purchase one item, you don't get its credit in any other
way.
There is a service tax payment.
If you pay service tax, you don't get its credit in sale
tax.
What should be done?
A meeting was held for this.
A council was held.
They said, this is absolutely right.
And the most wrong thing that is coming out of this is that
a tax is being imposed on a tax.
There are talks of killing the customer.
Why don't we make a tax system such that it is a universal
system that is going on in the world.
See, if we can't do anything, there is a problem in our
work.
Like it used to be in school.
If our marks were less, we used to see that our marks are
less, there is a problem.
Now see, the students who come first, second, third, their
marks are good, look at their copies.
So the government here started doing the same thing.
They sent their people abroad to see what they are doing
there.
Because we can't do it here.
Our system of taxation is being made so that the cost of
our things is increasing.
The item should be worth Rs. 1650.
Its cost is increasing to Rs. 1815.
Why? Because tax is being imposed on tax.
I am not giving credit.
The tax that I am paying during the purchase,
I am not getting credit for it.
People were sent abroad to research what people are doing
there.
Sir, when people went abroad, went to Australia, Singapore,
America, China, Japan,
there they found out that all these taxes that you have
made, excise, customs, sale tax, service tax, entertainment
tax, octroi, all this, there is nothing there.
Here, the meaning of so many taxes is that CA has to earn.
Every tax has a different return date.
Every tax has a different audit system.
The more the return, the more the audit.
The more the return, the more the audit, the more CA and
lawyers' fees.
Cases get stuck in assessments.
Commissioners call us to explain their case.
CA and lawyers take money for that.
Ultimately, who gets trapped?
A normal trader, a normal businessman, he will get trapped.
The one who wants to make a living, who is thinking that
I will open a small shop and sit there.
I will do a little sale.
My house will keep on running.
You have already troubled him.
You have already imposed 5-6 indirect taxes on him.
His return date is different.
His tax is different.
What will he do?
No one will get his credit.
This is why the people sent abroad came back.
They explained this to the finance minister at that time.
Minister, try to understand that there is no point in
imposing so many taxes.
No one is getting any benefit.
Only CA and lawyers' pockets are being filled.
And disputes are going on.
Disputes are going on in taxation.
You do one thing.
If you don't want to remove it, then make all these taxes
an umbrella tax in GST.
Make an umbrella tax in GST.
Put all the taxes in that umbrella.
Don't finish the old taxes.
Put them in GST.
Put their provisions in GST.
Only one tax will work now.
One nation, one tax.
Sir, a lot of research was done on this.
Finally, on 1st July 2017, on 1st July 2017, it was a
historic day.
When Prime Minister Narendra Modi came to the Parliament at
midnight, the bill of GST, the entire act of GST was
presented in front of him.
He said, from now on, from 1st July 2017, all the old,
existing, indirect taxes in our country, like service tax,
sale tax, finish them.
We admit that we have made a big mistake.
We have troubled the people.
We were in so much trouble.
Let's get rid of all those things.
From 1st July 2017, one nation, one tax.
One country, one tax.
Run that concept.
Remove all the taxes.
Bring a GST concept.
The major benefit of this GST concept is that the tax you
pay at the time of purchase, the tax you collect from the
customer while selling, the tax you pay at the time of
purchase, minus that.
This will be the biggest benefit.
One problem was removed.
The tax on tax that you were paying more than Rs.
100, this was also removed.
So, what happened generally, the prices of things were
substantially reduced.
The inflation was going on in the country.
There was no inflation.
If you pay tax on inflation, there will be inflation.
The inflation was slightly reduced.
This made a huge difference to the country's GDP.
There was a boost in the economy.
Sir, the share market went up.
Sir, this is a good king.
When there is a good government in the country, these are
the benefits.
The majority government did not take time to make the bill
into an act.
First, read the different acts.
Read the service tax, read the exercise tax, read the sale
tax.
Their loopholes, their return dates are different, their
audits are different, their assessments are different. I
used to go crazy. Now I don't have any problem.
The concept of GST has come. You get the credit.
Is the point clear?
I will stop this lecture here.
Because if I explain further, it will become a little heavy.
I will stop it here.
You understood the basic objective of bringing GST.
You were getting credit basically.
Input tax credit.
What happens, we will discuss further.
I will stop here. Take rest.
Try to understand what I have taught.
If you don't understand, watch it again.
It is not a big thing.
I will revise the next lecture again.
Till then, good night.
Thank you very much.