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State Board · Class 10 · Mathematics Part 1

Lesson 4: Financial Planning

5 concepts · 40 practice questions with answers · Free to read

This lesson is also in: मराठी

GST - Introduction

From daily life

Earlier, a packet of biscuits carried many hidden taxes added at the factory, at the state border, at the shop. Prices were hard to understand. Now one tax, GST, replaces most of them across the whole country.

Simple definition

GST (Goods and Services Tax; वस्तू व सेवा कर) is a single tax on goods and services, in force from 1 July 2017: "One nation, One tax, One market".

Rule 1: What GST replaced — Before GST there were many taxes at different stages: excise duty, customs duty, VAT, entertainment tax, central sales tax, service tax, octroi, luxury tax and others. All of these are subsumed under GST. Features: the cascading (tax on tax) effect is removed, so prices are controlled; transactions are transparent; traders register state-wise; and the system is technology driven.

  • Easy : Easy: GST stands for Goods and Services Tax.
  • Medium : Medium: GST started on 1 July 2017.
  • Exam-type : Exam: Why is GST called "One nation, One tax, One market"? One tax system replaces many taxes in the whole country.

Rule 2: Dual model: CGST, SGST, UTGST, IGST — Within one state (intra-state) the central and state governments get equal shares: CGST (Central GST) and SGST (State GST). In a Union Territory UTGST is levied instead of SGST. On trade between two states (inter-state) the Centre levies IGST (Integrated GST) and keeps the whole amount (it is later shared). Rate of GST = rate of CGST + rate of SGST.

GST of 18% is split into CGST 9 and SGST 9 inside a state, and is IGST 18 between statesSale within one state: GST 18% is shared equallyCGST 9% → CentreSGST 9% → StateSale to another state: only IGSTIGST 18% → Centre (shared later)On ₹ 1000: CGST ₹ 90 + SGST ₹ 90 = ₹ 180 (or IGST ₹ 180)

In the figure : In the figure GST is shared between the Centre and the State inside a state, and is IGST between states.

  • Easy : Easy: GST 18% means CGST 9% and SGST 9%.
  • Medium : Medium: Pune to Nashik is intra-state (CGST + SGST); Pune to Chennai is inter-state (IGST).
  • Exam-type : Exam: Taxable value ₹ 2000 at 12%: GST = ₹ 240, CGST = ₹ 120, SGST = ₹ 120.

Rule 3: GST rates and the composition scheme — The rates are 0%, 5%, 12%, 18% and 28% (as given in the textbook; the government revises slabs from time to time). 0%: food grains, fruits, vegetables, milk, salt, education, health care. 5%: tea, coffee, edible oil, spices, sweets, bus and rail travel. 12%: butter, ghee, dry fruits, mobile phones. 18%: most goods and services. 28%: luxury cars, air conditioners, refrigerators, tobacco products. Composition scheme: a dealer with turnover below ₹ 1.5 crore in the previous year may pay a fixed small rate: 5% for restaurants, 1% for manufacturers and traders. Such a dealer cannot collect GST from customers, issues a "bill of supply", files returns quarterly, cannot make inter-state sales and cannot take ITC.

  • Easy : Easy: Milk is taxed at 0%.
  • Medium : Medium: A trader with turnover ₹ 80 lakh under the 1% scheme pays ₹ 80,000 (CGST ₹ 40,000 + SGST ₹ 40,000).
  • Exam-type : Exam: Why can a composition dealer not claim ITC? The scheme gives a low fixed rate in return for giving up the credit.
Remember

GST rate = CGST + SGST. Inter-state = IGST.

Common mistake

Writing CGST as the full GST rate. CGST is only half.

Shortcut

Memory clue: "राज्यात CGST + SGST; राज्याबाहेर IGST".

Spot the difference

TaxWhen
CGST + SGSTWithin a state
CGST + UTGSTWithin a Union Territory
IGSTBetween states

Practice questions

Easy
  1. 1What does GST stand for?
  2. 2When did GST begin?
  3. 3Name the GST rate slabs.
Medium
  1. 4If CGST is 6%, what is SGST and GST?
  2. 5Which tax is levied on inter-state trade?
  3. 6What replaces SGST in a Union Territory?
Challenging
  1. 7Taxable value ₹ 4000 at 5%. Find CGST.
  2. 8A trader's turnover is ₹ 90 lakh. Can he use the composition scheme? Why?
Show answers (try them yourself first)
  1. 1Goods and Services Tax.
  2. 21 July 2017.
  3. 30%, 5%, 12%, 18%, 28%.
  4. 4SGST 6%, GST 12%.
  5. 5IGST.
  6. 6UTGST.
  7. 72.5% of 4000 = ₹ 100.
  8. 8Yes, since it is below ₹ 1.5 crore.

GST - Tax Invoice

From daily life

When you buy a mobile at a shop, the bill lists the price, then CGST, then SGST, then the grand total. That bill is a tax invoice. It proves how much tax you paid and to whom.

Simple definition

A tax invoice (कर चलन) shows the supplier's details, GSTIN, items with taxable value, CGST, SGST and the total. Total = taxable value + CGST + SGST.

Rule 1: What the invoice shows — The value on which GST is charged is the taxable value; the amount with GST is the invoice value. If not stated, the selling price is the taxable value. In a tax invoice CGST amount = SGST amount, and GST rate = CGST rate + SGST rate. A GSTIN (GST Identification Number) has 15 characters; the first 2 digits are the state code (27 for Maharashtra) and it includes the dealer's 10-character PAN. A GSTIN is mandatory if turnover in the previous year exceeds ₹ 20 lakh. Goods have an HSN code and services a SAC code.

A small sample tax invoice with two items, CGST and SGST columns and a total of 528 rupeesTAX INVOICE (sample)ItemTaxable ₹CGSTSGSTTotal ₹Pen set (12%)503356Bag (18%)4003636472Total4503939528Total = taxable value + CGST + SGST (50 + 3 + 3 = 56)

In the figure : In the figure a sample tax invoice: total = taxable value + CGST + SGST.

  • Easy : Easy: Pencil box ₹ 250 at 12%: CGST = SGST = ₹ 15; total ₹ 280.
  • Medium : Medium: ₹ 1200 at 18%: CGST = SGST = ₹ 108; total ₹ 1416.
  • Exam-type : Exam: A GSTIN starts with 27: the dealer is in Maharashtra.

Rule 2: Solving invoice problems — Printed price ₹ 30,000 with 10% discount: taxable value = ₹ 27,000. At 28% GST, CGST = SGST = 14% of 27,000 = ₹ 3780, so total = 27,000 + 3780 + 3780 = ₹ 34,560. If the total ₹ 2360 includes 18% GST: taxable value = 2360 ÷ 1.18 = ₹ 2000 and CGST = SGST = ₹ 180. If CGST on ₹ 1000 is ₹ 60, then CGST rate = 6% and GST rate = 12%.

  • Easy : Easy: Total ₹ 112 at 12% means taxable value ₹ 100.
  • Medium : Medium: Taxable ₹ 500 at 18%: total = 500 + 45 + 45 = ₹ 590.
  • Exam-type : Exam: A sofa of ₹ 20,000 with 5% discount: taxable ₹ 19,000; at 18% GST total = 19,000 + 1710 + 1710 = ₹ 22,420.
Remember

Discount first, then GST on the reduced price.

Common mistake

Charging GST on the printed price before the discount. GST is on the taxable (discounted) value.

Shortcut

Memory clue: "सूट → करपात्र → GST → एकूण".

Spot the difference

ItemTaxableRateTotal
Pencil box25012%280
Item120018%1416
Item27,00028%34,560

Practice questions

Easy
  1. 1What is a tax invoice?
  2. 2Total = ?
  3. 3Number of characters in a GSTIN?
Medium
  1. 4State code of Maharashtra in GSTIN?
  2. 5Taxable ₹ 800 at 18%. Find total.
  3. 6Total ₹ 1120 includes 12% GST. Find taxable value.
Challenging
  1. 7Printed price ₹ 5000, discount 20%, GST 18%. Find the total.
  2. 8CGST on a service is ₹ 135 and taxable value is ₹ 1500. Find the GST rate.
Show answers (try them yourself first)
  1. 1A bill showing the taxable value, CGST, SGST and total.
  2. 2Taxable value + CGST + SGST.
  3. 315.
  4. 427.
  5. 5800 + 72 + 72 = ₹ 944.
  6. 6₹ 1000.
  7. 7Taxable 4000; GST 720; total ₹ 4720.
  8. 8CGST rate 9%, so GST rate 18%.

GST - Computation and ITC

From daily life

A baker buys flour with GST paid, sells bread with GST collected, and then pays the government only the difference. This avoids tax on tax. The credit he takes for tax already paid is called Input Tax Credit.

Simple definition

GST payable = Output tax − ITC. Input tax is GST paid on purchases; output tax is GST collected on sales; ITC (Input Tax Credit; आदान कर श्रेय) is the input tax deducted.

Rule 1: B2B, B2C and ITC — Trade between two GSTIN holders is B2B (Business to Business); trade with a consumer is B2C (Business to Consumer), the last link: manufacturer → wholesaler → retailer → consumer. The payable GST is split equally into payable CGST and payable SGST (UTGST in a Union Territory). The customer finally bears the whole tax, so GST is an indirect tax.

  • Easy : Easy: Input tax ₹ 100, output tax ₹ 150: payable ₹ 50.
  • Medium : Medium: Payable ₹ 50 means CGST ₹ 25 and SGST ₹ 25.
  • Exam-type : Exam: Why is GST called an indirect tax? Traders collect it, but the consumer finally bears it.
A supply chain where each trader pays output tax minus input tax, so the total tax equals 12 percent of the final priceInput tax credit at 12% GSTMakerSells ₹ 100Output tax 12Input tax − 0Pays ₹ 12= 12 − 0WholesalerSells ₹ 150Output tax 18Input tax − 12Pays ₹ 6= 18 − 12RetailerSells ₹ 200Output tax 24Input tax − 18Pays ₹ 6= 24 − 18Total GST = 12 + 6 + 6 = ₹ 24 = 12% of ₹ 200 (the final price)

In the figure : In the figure input tax credit means each trader pays only the tax on the value he adds.

Rule 2: A supply chain — Manufacturer sells at ₹ 500, wholesaler at ₹ 700, retailer to the consumer at ₹ 900, all at 18%. Output taxes: 90, 126, 162. GST paid to government: manufacturer ₹ 90; wholesaler 126 − 90 = ₹ 36; retailer 162 − 126 = ₹ 36; total ₹ 162 (CGST ₹ 81 + SGST ₹ 81), which is exactly 18% of ₹ 900. The consumer pays 900 + 162 = ₹ 1062.

  • Easy : Easy: Manufacturer's tax: 18% of 500 = ₹ 90.
  • Medium : Medium: Wholesaler: output ₹ 126, ITC ₹ 90, payable ₹ 36.
  • Exam-type : Exam: The three payments 90 + 36 + 36 = 162 equal the tax on the final price.

Rule 3: Solved cases — A trader bought at taxable ₹ 15,000 and sold at ₹ 20,000 at 12%: input ₹ 1800, output ₹ 2400, payable ₹ 600 (CGST ₹ 300 + SGST ₹ 300). If the prices ₹ 11,800 and ₹ 17,700 include 18% GST: taxable values 10,000 and 15,000, input ₹ 1800, output ₹ 2700, payable ₹ 900. In Chandigarh (a Union Territory), a trader with sales ₹ 30,000 and purchases ₹ 26,000 at 5% pays 5% of 4000 = ₹ 200 (CGST ₹ 100 + UTGST ₹ 100).

  • Easy : Easy: Output ₹ 2400 − input ₹ 1800 = ₹ 600.
  • Medium : Medium: 11,800 ÷ 1.18 = ₹ 10,000.
  • Exam-type : Exam: In a Union Territory the payable tax splits into CGST and UTGST.

Rule 4: IGST credit — When goods are bought from another state, IGST is paid. This credit is used first against IGST, then CGST, then SGST. A Maharashtra trader buys goods of ₹ 10,000 from Gujarat and pays IGST 18% = ₹ 1800. He sells them within Maharashtra for ₹ 12,000: CGST ₹ 1080 + SGST ₹ 1080. IGST credit 1800 first clears CGST: payable CGST = 1080 − 1080 = 0; the remaining 720 is used for SGST: payable SGST = 1080 − 720 = ₹ 360. Total payable ₹ 360 = output 2160 − input 1800.

  • Easy : Easy: IGST is paid on inter-state purchases.
  • Medium : Medium: Use the IGST credit first for IGST, then CGST.
  • Exam-type : Exam: Total payable is still output tax minus input tax.
Remember

GST payable = output − input. Split into CGST and SGST equally.

Common mistake

Subtracting the sale price from the purchase price instead of the taxes. Subtract the tax amounts.

Shortcut

Memory clue: "जावक − आदान = भरावा".

Spot the difference

TermMeaning
Input taxGST paid on purchases
Output taxGST collected on sales
ITCInput tax deducted
Payable GSTOutput − ITC

Practice questions

Easy
  1. 1Define input tax.
  2. 2Define output tax.
  3. 3Formula for payable GST?
Medium
  1. 4What is B2C?
  2. 5Output ₹ 900, input ₹ 650. Payable? CGST?
  3. 6A trader buys at taxable ₹ 4000 and sells at ₹ 5000, GST 12%. Find the payable GST.
Challenging
  1. 7For prices 100, 150, 200 at 10%, how much does the retailer pay?
  2. 8Why does ITC avoid tax on tax?
Show answers (try them yourself first)
  1. 1GST paid on purchases.
  2. 2GST collected on sales.
  3. 3Output tax − ITC.
  4. 4Business to Consumer.
  5. 5₹ 250; CGST ₹ 125.
  6. 6600 − 480 = ₹ 120.
  7. 720 − 15 = ₹ 5.
  8. 8Each trader pays tax only on the value he adds.

Shares

From daily life

A company needs money to grow. It cuts its ownership into small equal pieces called shares and sells them. Buy one share and you own a tiny piece of the company and share in its profit.

Simple definition

A share (समभाग) is the smallest unit of a company's capital. Face value (FV) is printed on the certificate; market value (MV) is the price in the share market. Dividend is paid on FV.

Rule 1: Face value, market value, premium, discount — Shares are traded on a stock exchange: BSE (Bombay Stock Exchange, the oldest in Asia) and NSE (National Stock Exchange). If MV > FV, the share is at a premium (MV = FV + premium); if MV = FV, at par; if MV < FV, at a discount. FV ₹ 10 with premium ₹ 6 has MV ₹ 16. FV ₹ 50 and MV ₹ 38 is at a discount of ₹ 12. FV ₹ 100 with premium ₹ 40 has MV ₹ 140.

A share with face value 10 and market value 50: dividend is worked out on face value and the return on the invested amountFace value, market value and dividendFace value FV₹ 10 (printed)Market value MV₹ 50 (today)Dividend 20% of FV= ₹ 2 per shareInvested: 100 × 50= ₹ 5000Dividend income = 100 × 2 = ₹ 200Return = 200 ÷ 5000 × 100 = 4%

In the figure : In the figure dividend is calculated on the face value, the amount invested on the market value.

  • Easy : Easy: FV ₹ 10, MV ₹ 10: at par.
  • Medium : Medium: FV ₹ 100, MV ₹ 85: discount ₹ 15.
  • Exam-type : Exam: MV ₹ 175 and premium ₹ 75 give FV ₹ 100.

Rule 2: Dividend and rate of return — Sum invested = number of shares × MV. Dividend per share = dividend rate × FV. Rate of return = dividend incomesum invested × 100. 40 shares, FV ₹ 10, MV ₹ 15, dividend 20%: invested 40 × 15 = ₹ 600; dividend per share ₹ 2, total ₹ 80; return = 80600 × 100 = 13.33%. One share FV ₹ 100, MV ₹ 125, dividend 10%: return = 10125 × 100 = 8%.

  • Easy : Easy: FV ₹ 10 at 30% dividend gives ₹ 3 per share.
  • Medium : Medium: ₹ 12,000 at MV ₹ 15 buys 800 shares.
  • Exam-type : Exam: 800 shares, FV ₹ 10, dividend 25%: income = 800 × 2.5 = ₹ 2000; return = 200012000 × 100 = 16.67%.

Rule 3: Brokerage — A registered broker buys or sells shares for us and charges brokerage, always on the market value. Buying price = MV + brokerage; selling price = MV − brokerage. The broker charges 18% GST on the brokerage (9% CGST + 9% SGST). MV ₹ 200, brokerage 0.5% (₹ 1 per share): 50 shares cost 50 × 201 = ₹ 10,050 and sell for 50 × 199 = ₹ 9,950. Including GST: brokerage 50 + GST 9 (₹ 4.50 + ₹ 4.50), so the buyer pays 10,000 + 50 + 9 = ₹ 10,059.

  • Easy : Easy: Brokerage 0.5% of ₹ 200 is ₹ 1.
  • Medium : Medium: Buying price = 200 + 1 = ₹ 201.
  • Exam-type : Exam: Bought 100 shares at MV ₹ 60 (brokerage 0.5%) and sold at MV ₹ 70: cost 100 × 60.30 = 6030; sale 100 × 69.70 = 6970; profit ₹ 940 before GST.

Rule 4: Demat account — A Demat account keeps shares in electronic form, and a trading account is needed to buy and sell. Banks and brokers (Depository Participants) open them under the depositories NSDL and CDSL. Share brokers are governed by SEBI (Securities and Exchange Board of India).

Live figure

Shares

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  • Easy : Easy: Shares in a Demat account are held electronically.
  • Medium : Medium: SEBI regulates share brokers.
  • Exam-type : Exam: Why is a trading account needed with a Demat account? To place buy and sell orders.
Remember

Dividend on FV. Investment on MV. Brokerage on MV.

Common mistake

Calculating dividend on the market value. Dividend is always on the face value.

Shortcut

Memory clue: "लाभांश = FV; गुंतवणूक = MV".

Spot the difference

TermMeaning
FVPrinted value
MVPrice in market
DividendProfit share on FV
BrokerageBroker's fee on MV

Practice questions

Easy
  1. 1What is a share?
  2. 2What is the face value?
  3. 3FV ₹ 10, MV ₹ 14. Premium?
Medium
  1. 4FV ₹ 100, MV ₹ 92. Discount?
  2. 550 shares at MV ₹ 20. Sum invested?
  3. 6Dividend 15% on FV ₹ 100. Dividend per share?
Challenging
  1. 7FV ₹ 100, MV ₹ 150, dividend 12%. Find the rate of return.
  2. 8Buying 10 shares at MV ₹ 500, brokerage 0.2%. Total cost excluding GST?
Show answers (try them yourself first)
  1. 1The smallest unit of a company's capital.
  2. 2The value printed on the share certificate.
  3. 3₹ 4.
  4. 4₹ 8.
  5. 5₹ 1000.
  6. 6₹ 15.
  7. 712150 × 100 = 8%.
  8. 8Brokerage ₹ 1 per share; 10 × 501 = ₹ 5010.

Mutual Funds and SIP

From daily life

If you cannot choose good shares yourself, you and many others can put money into one pot, and an expert chooses where to invest it. That pot is a mutual fund.

Simple definition

A mutual fund (म्युच्युअल फंड) pools money from many investors and invests it through experts. We get units, and each unit's price is its NAV (Net Asset Value).

Rule 1: Mutual funds and NAV — A fund is run by an AMC (Asset Management Company) and invests in equity funds (shares), debt funds (bonds) or balanced funds, so the risk is spread. Investments are subject to market risk. NAV of one unit = total fund value ÷ number of units, and total value = NAV × units. A scheme worth ₹ 120 crore with 6 crore units has NAV = ₹ 20. ₹ 15,000 at NAV ₹ 30 buys 500 units. 250 units at NAV ₹ 12.40 cost ₹ 3100.

Investors put money into a pool; experts invest it in many schemesHow a mutual fund worksMany investorssmall amountsMutual fundone big poolExpert fundmanager investsMany schemesspread of risk

In the figure : In the figure a mutual fund pools small amounts and invests them through experts in many schemes.

  • Easy : Easy: ₹ 100 crore ÷ 5 crore units = NAV ₹ 20.
  • Medium : Medium: ₹ 6000 at NAV ₹ 20 gives 300 units.
  • Exam-type : Exam: 400 units at NAV ₹ 25 are worth ₹ 10,000.

Rule 2: SIP and safety — With a SIP (Systematic Investment Plan) one invests a small fixed amount regularly, for example ₹ 500 a month. It builds the saving habit and smooths out market ups and downs: ₹ 500 at NAV ₹ 25 buys 20 units, and next month ₹ 500 at NAV ₹ 20 buys 25 units; for ₹ 1000 you hold 45 units at an average cost of about ₹ 22.22 per unit. Bank FDs and post office schemes are safer but give low returns that may not beat inflation. Risk and return go together, and a SIP should be kept for at least 3 to 5 years, ideally 10 to 15.

  • Easy : Easy: SIP means investing a small amount regularly.
  • Medium : Medium: ₹ 500 at NAV ₹ 20 gives 25 units.
  • Exam-type : Exam: Two instalments give 20 + 25 = 45 units for ₹ 1000, so average cost = 100045 ≈ ₹ 22.22.
Remember

NAV = total value ÷ units. SIP: small, regular, long term.

Common mistake

Thinking mutual funds are risk-free. They are subject to market risk.

Shortcut

Memory clue: "नियमित + दीर्घकाळ = SIP".

Spot the difference

TermMeaning
UnitShare of a fund
NAVPrice of one unit
SIPRegular small investment
AMCCompany that runs the fund

Practice questions

Easy
  1. 1What is a mutual fund?
  2. 2What is NAV?
  3. 3Formula for NAV?
Medium
  1. 4What does SIP stand for?
  2. 5₹ 8000 at NAV ₹ 40. How many units?
  3. 6120 units at NAV ₹ 15. Value?
Challenging
  1. 7₹ 200 crore fund with 8 crore units: NAV?
  2. 8Why can an FD give less real return than a mutual fund over a long time?
Show answers (try them yourself first)
  1. 1A pool of many investors' money managed by experts.
  2. 2The price of one unit of the fund.
  3. 3Total value ÷ number of units.
  4. 4Systematic Investment Plan.
  5. 5200.
  6. 6₹ 1800.
  7. 7₹ 25.
  8. 8Its rate is low and may not beat inflation, but it is safer.

Quick revision

  • GST payable = Output tax − ITC; rate of GST = rate of CGST + rate of SGST and the CGST amount = SGST amount; the GST rates are 0%, 5%, 12%, 18% and 28%.
  • Sum invested = number of shares × MV; rate of return = dividend incomesum invested × 100; dividend is reckoned on FV and brokerage on MV (buying: MV + brokerage, selling: MV − brokerage) with 18% GST on the brokerage.
  • NAV of one unit × number of units = total fund value; SIP means small regular investments for the long term.
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Quick revision

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