Question

A manufacturer listed the price of his goods at ₹ 160 per article. He allowed a discount of 25% to a wholesaler who in his turn allowed a discount of 20% on the listed price to a retailer. The rate of sales tax on the goods is 10%. If the retailer sells one article to a consumer at a discount of 5% on the listed price, then find
(i) the VAT paid by the wholesaler.
(ii) the VAT paid by the retailer.
(iii) the VAT received by the Government.

Answer 1

List price (MP) of the goods = ₹ 160 per article
Rate of discount = 25%
S.P.

= `("MP" xx (100 - "D%"))/(100)`

= ₹`(160(100 - 25))/(100)`

= ₹`(160 xx 75)/(100)`
= ₹120
Rate of VAT = 10%
∴ Total VAT

= ₹`(120 xx 10)/(100)`
= ₹12
Now S.P. of wholesaler = ₹160
Rate of discount = 20%
∴ Net S.P. 

= ₹`(160 xx (100 - 20))/(100)`

= ₹`(160 xx 80)/(100)`
= ₹128
Rate of VAT = 10%
∴ Total VAT

= `₹(128 xx 10)/(100)`
= ₹12.80
Total S.P.
= ₹128 + ₹12.80
= ₹140.8
Now S.P. of the retailer = ₹160
Net S.P.

= ₹`(160 xx (100 - 5))/(100)`

= ₹`(160 xx 95)/(100)`
= ₹152
VAT at the rate of 10%

= ₹`(152 xx 10)/(100)`
= ₹15.20
(i) VAT paid by the wholesaler
= ₹12.80 – ₹12
= ₹0.80
(ii) VAT paid by the retailer
= 15.20 – 12.80
= ₹2.40
(iii) Total VAT paid to the Govt.
= ₹ 15.20.