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Question
A manufacturing company sold an article to its distributor for ₹22000 including VAT. The distributor sold the article to a dealer for ₹22000 excluding tax and the dealer sold it to a consumer for ₹25000 plus tax (under VAT). If the rate of sales tax (under VAT) at each stage is 10%, find :
(i) the sale price of the article for the manufacturing company.
(ii) the amount of VAT paid by the dealer.
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Solution
S.P. of an article for a manufacturer = ₹22000 including VAT
C.P. for the distributor = ₹22000
Rate of VAT = 10%
S.P. for the distributor of ₹22000 excluding VAT
S.P. for the consumer
= ₹25000 + Tax(VAT)
= ₹25000 + 10% of ₹25000
= ₹25000 + ₹2500
= ₹27500
(i) Sale price for the manufacturer
= `₹22000 xx (100)/(100 + 10)`
= `₹22000 xx (100)/(110)`
= ₹20000
(ii) Amount of VAT paid by the dealer
= `₹25000 xx (10)/(100)`
= ₹2500.
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