Sales Tax/Value Added Tax


Sales tax (ST) is charged by the government on the sale of an item. It is collected by the shopkeeper from the customer and given to the government. This is, therefore, always on the selling price of an item and is added to the value of the bill. There is another type of tax which is included in the prices known as Value Added Tax (VAT).
From July 1, 2017, Government of India introduced GST which stands for Goods and Services Tax which is levied on supply of goods or services or both.

Example : (Finding Sales Tax) The cost of a pair of roller skates at a shop was Rs. 450. The sales tax charged was 5%. Find the bill amount.
Solution:  On Rs.100, the tax paid was Rs. 5.
On Rs.450 , the tax paid would be = Rs. `5/100 xx 450`
= Rs. 22.50
Bill Amount = cost of items + Sales tax = Rs.450 + Rs.22.50 = Rs.472.50.

Example : (Value Added Tax (VAT)) Waheeda bought an air cooler for Rs. 3300 including a tax of 10%. Find the price of the air cooler before VAT was added.
Solution: The price includes the VAT, i.e., the value added tax. Thus, a 10% VAT means if the price without VAT is Rs. 100 then price including VAT is Rs. 110.
Now, when price including VAT is Rs. 110, original price is Rs. 100.
Hence when price including tax is  3300, the original price =  Rs. `100/110 xx 3300 ` = Rs.3000.

Example : Salim bought an article for Rs. 784 which included GST of 12% . What is the price of the article before GST was added? 
Solution: Let original price of the article be  Rs. 100.  GST = 12%.
Price after GST is included = Rs. (100+12) = Rs. 112 
When the selling price is  Rs. 112 then original price = Rs. 100. 
When the selling price is Rs. 784, then original price = Rs.`100/12 xx 784 `= Rs.700

If you would like to contribute notes or other learning material, please submit them using the button below. | Sales Tax and VAT

Next video

Sales Tax and VAT [00:11:06]


View all notifications
Create free account

      Forgot password?
View in app×