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.

#### Solution

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.

#### Notes

₹