Class 8 - Taxes Explained: Types, GST, Solved Examples & Practice Questions

The government collects money from people and businesses to pay for roads, schools, hospitals, and defence. This money is called a tax. All taxes in India fall into two broad groups: direct taxes and indirect taxes.

Table of Contents

• Types of Taxes (Direct Tax & Indirect Tax)
• GST (Goods and Services Tax)
• Solved Examples on Taxes
• Practice Questions on Taxes
• Conclusion

Types of Taxes (Direct Tax & Indirect Tax)

What is a Direct Tax?

A direct tax is a tax that you pay straight from your own earnings or wealth to the government. The person who earns the money bears the full burden of the tax. It cannot be passed on to anyone else.

• You earn money from a job or business.

• The government calculates how much tax you owe on that income.

• You pay that amount directly to the Income Tax Department.

What is an Indirect Tax?

An indirect tax is collected through the buying and selling of goods and services. A business collects the tax on behalf of the government and includes it in the product price. The final buyer pays for it without realising it is a tax.

• You buy a bottle of shampoo at a shop.

• The price includes GST (a type of indirect tax).

• The shopkeeper collects the GST and pays it to the government.

GST (Goods and Services Tax)

GST stands for Goods and Services Tax. It replaced many older taxes like VAT, service tax, excise duty, and entertainment tax with a single unified tax system across India. It came into effect on 1 July 2017.

Solved Examples on Taxes

Example 1: A pen costs ₹200. GST rate is 18%. Find the GST amount and final price.

Solution: GST = 18% of 200 = (18/100) × 200 = ₹36

Final Price = Cost + GST = 200 + 36 = ₹236

Example 2: The final price of a bag is ₹590 including 18% GST. Find the original price.

Solution: Let original price = ₹x. GST = 18% of x

Final price = x + 0.18x = 1.18x

1.18x = 590 → x = 590 ÷ 1.18 = ₹500

Example 3: A student buys a notebook for ₹150 and a geometry box for ₹250. GST is 12%. Find the total amount paid.

Solution: Total cost = 150 + 250 = ₹400

GST = 12% of 400 = (12/100) × 400 = ₹48

Total amount = 400 + 48 = ₹448

Example 4: A toy costs ₹500. Shop A charges 5% GST and Shop B charges 12% GST. Which shop is cheaper?

Solution: Shop A: GST = 5% of 500 = ₹25, Final price = ₹525

Shop B: GST = 12% of 500 = ₹60, Final price = ₹560

Shop A is cheaper.

Example 5: A shirt costs ₹400. The final price after GST is ₹448. Find the GST rate.

Solution: GST amount = 448 − 400 = ₹48

GST rate = (48/400) × 100 = 12%

GST rate = 12%

Practice Questions on Taxes

1. A pencil box costs ₹120. GST is 5%. Find the GST amount and final price.
2. A book costs ₹350 including 10% GST. Find the price before tax.
3. A mobile cover costs ₹200. GST is 18%. What is the total amount to be paid?
4. A shirt is sold for ₹800 including GST of 12%. Find the GST amount.
5. A toy costs ₹450. GST rate is 5%. Find the final price.
6. GST means ________.
7. If GST rate is 18%, then tax is calculated on ________ price.
8. The price of a bag after adding 18% GST is ₹590. Find the original price.
9. The final price = original price + ________.
10. A product costs ₹400 before tax. After adding GST, the final price is ₹472. Find the GST rate.

Conclusion

In conclusion, taxes such as GST are added to the original price of goods and services, and they play an important role in determining the final price paid by the consumer.