Sales tax and GST

A tax is simply a percentage of the price, added to what the customer pays. Whether it is called sales tax or GST, the shopkeeper is only the collector — the money is passed on to the government, so it must never be counted as the shopkeeper's profit. For a simple sales tax at rate $r\%$ on a Selling Price $SP$, the tax amount and the final bill are:

where: $SP$ is the price before tax, $r$ is the tax rate as a percentage, Tax is the rupee amount added, and Bill Amount is what the customer actually pays. GST works on the same idea, but when the buyer and seller are in the same state, the tax is split into two equal halves for the printed receipt:

where: CGST is the Central GST share, SGST is the State GST share, and together they equal the same total tax a plain sales-tax calculation would give — GST does not add extra cost, it only reports the tax in two labelled parts. (When buyer and seller are in different states, a single IGST equal to the full rate applies instead of the split — that detail, and combining GST with discounts, belongs to Class 10.) The figure below shows how one price grows into a final bill under each system — same arithmetic, different receipt layout.

A calculator has a listed price of ₹500, with sales tax charged at 8%. Find the tax and the bill amount, and then find what the bill would look like if the same ₹500 item instead attracted 12% GST split equally between CGST and SGST.

Step 1. Sales tax on ₹500 at 8%: $\text{Tax} = 500 \times \dfrac{8}{100} = ₹40$, so the bill amount is $500 + 40 = ₹540$.

Step 2. Now suppose GST at 12% applies instead. Total GST $= 500 \times \dfrac{12}{100} = ₹60$.

Step 3. Split the total GST equally: $\text{CGST} = \text{SGST} = \dfrac{60}{2} = ₹30$ each.

Step 4. Bill amount under GST: $500 + 30 + 30 = ₹560$. The calculator's final bill is ₹560, shown on the receipt as ₹500 price + ₹30 CGST + ₹30 SGST, exactly the same total the single 12% sales-tax method would have given.

Second check — a bigger price

A pair of headphones is priced at ₹1,200, with GST at 12% split equally as CGST and SGST. Total GST $= 1200 \times \dfrac{12}{100} = ₹144$, so $\text{CGST} = \text{SGST} = ₹72$ each, and the final bill is ₹1,344. Notice the method is identical to Step 1 above — find the tax, then add it — GST only adds the extra step of halving that tax amount for the receipt. It is worth checking both worked answers against each other. In Step 1 of the first example, the plain 8% sales tax on ₹500 gave a bill of ₹540, while in Steps 2 to 4 a 12% GST on the same ₹500 item gave ₹560 — the bill is larger only because the rate itself is higher (12% versus 8%), not because splitting the tax into CGST and SGST adds anything extra. If both examples had used the same rate, say 8% sales tax and 8% GST split as 4% CGST plus 4% SGST, both routes would land on exactly ₹540. This is a useful self-check whenever a question gives you a GST rate: compute the bill once as a single combined tax, and once by splitting into CGST and SGST, and confirm the two totals match before writing a final answer.

• Charging tax on the Marked Price instead of the price the customer actually pays after any discount — tax always applies to the final selling price, not the original tag price.
• Adding CGST and SGST as if they were two separate taxes on top of each other; a 12% GST bill means 6% CGST plus 6% SGST, totalling 12%, not 24%.
• Treating the collected tax as part of the shopkeeper's profit — it is passed on to the government and must be kept out of any profit or loss calculation.
• Bringing sales tax or GST into a Class 8 question that only mentions CP, SP, MP, profit, loss or discount — if the question does not mention tax, this topic does not belong in the answer.

Ask the tutor: Want to see how GST combines with discounts in the Class 10 syllabus, or just want a few more Class 8 profit-and-loss practice questions instead — ask the AI tutor.