What will happen to your opening stock tax after GST?

As we all know that GST is in effect from July 1st, 2017 i.e from yesterday, so we all are trying to adapt to the new tax regime as fast as possible. One question everyone is concerned about is, What will happen to the opening stock tax after GST ?

As every businessman has some opening stock on July 1st, it is imperative to answer this question so that he can conduct his business in a smooth manner.

We will answer this question from the perspective of PCD Pharmaceutical Business.

How much tax I will be able to collect from my customers by selling this opening stock?

You can sell this opening stock after applying GST rates accordingly. So in case of pharma products you can sell these products after applying 12% GST tax rate.

This opening stock is not different in any case from the goods you will purchase in July under GST.

opening stock tax after gst

Should I have to pay GST on this opening stock in advance to Govt.?

Well, you might be thinking that if I can collect 12% tax from my customers on pharma products then should I have to pay this tax to Govt. in advance before selling my goods. Because Govt is not going to allow me to buy goods at 2% CST and sell those at 12% GST.

You are right, in any case you have to pay govt. GST on opening stock but this time govt rules are a bit relaxing, so you can sell your goods first and then payback the govt. This is explained in details in below example.

opening stock tax after gst


Let us consider one example of firm named Dhingra Pharmaceuticals, Haryana. Now the owner of firm Mr. Sahil Dhingra has some opening stock on July 1st, 2017. Now we will see in steps how will he sell that stock and pay tax to the govt.


Opening Stock of Dhingra Pharmaceuticals on July 1st :  3,00,000 /- (3 lakhs)

Now Mr. Sahil Dhingra has paid 2% CST to Trumac Healthcare to own this stock.

CST paid on opening stock: 2% =  6000/-

Now suppose he sells this stock in the month of July as per GST rate of 12%.

Stock sold till July 31, 2017:  1,00,000/-

GST collected on sold stock: 12%:  12000/-

Now according to the govt rules, Mr. Dhingra will get some rebate on the GST he will pay to the Government.

GST = CGST + SGST  (Central GST + State GST)

GST = 6% (CGST) + 6% (SGST) = 12%

Now state will give no rebate on its SGST but centre is giving 40% rebate on CGST.

REBATE = 40% OF 6% CGST = 2.4%

Now Mr. Dhingra can keep 2.4% GST collected with himself and rest 9.6% he can pay to the government.

Tax Paid to the Government =  12000 – 2400 = 9600/-

In this way Mr. Sahil Dhingra has 6 months to sell the opening stock of 3 Lakhs and he can pay GST minus rebate after selling the goods. So its a comfortable  situation for him.

I hope now the concept of GST and how to handle the opening stock is clear to you. If it isn’t then you can always post your query in the comments section below.

If you are still unclear about the transition of opening stock from VAT to GST then you can read this awesome article on ClearTAX

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