Missing Trader Problem in GST

After coming of GST, missing trader problem may arise. For understanding this problem, we explain it with a simple example. Please forget CGST and SGST and IGST. We are focusing accounting  loss of next trader due to missing of previous trader.

Mr. Rajesh has his own business in Surat. He needed some goods of Rs. 1,00,000. So, he bought same goods from Mis Ranuka. Now, Mis Ranuka is seller and Mr. Rajesh is buyer. Following is the Invoice which will be given by Mis Ranuka to Mr. Rajesh

Goods Sold = Rs. 1,00,000

GST ( 20%) = Rs. 20000
Total = Rs. 120,000

Now, Revenue of Sold goods and GST in the pocket of Mis. Ranuka. Mr. Rajesh has paid full amount of RS. 120,000 and received goods.

He has trading business. He sold same goods to Mr. Mohan at Rs. 102,000 at 20% profit. GST is on sale. So, He collected following amount from

Goods sold value = Rs. 102,000
GST (20%) = RS. 20400

GST (20%) = Rs. 20400


He collected sales amount from Mr. Mohan. He filled GST Return and paid Rs. 20,400 through challan. He claimed Rs. 20,000 from GST Department as Input Credit because he already paid Rs. 20,000 during the time of purchase. GST department has rejected because GST Department did not receive Rs. 20,000 from Mis Ranuka because Mis Ranuka is missing. She did not file the return.

Now, this problem is called missing trader problem in GST. We see how is net loss to next trader.

Net Tax liability of Mr. Rajesh was = Rs. 20400-20000 = Rs. 400

But he paid Rs. 20400 and did not get input credit of Rs. 20,000 due to missing trader Mis Ranuka.

Total loss of Mr. Rajesh = Rs. 20000

Profit from this deal = Rs. 102000 - Rs. 100000 = Rs. 2000

Net loss of Mr. Rajesh = Rs. 18000

In the balance sheet, this net loss will be deducted from capital. No central or state govt. is responsible for this missing trader problem.

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Accounting Education: Missing Trader Problem in GST
Missing Trader Problem in GST
Accounting Education
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