Question

An article is marked at Rs 500. The wholesaler sells it to a retailer at 20% discount and charges sales tax on the remaining price at 12.5%. The retailer, in turn, sells the article to a customer at its marked price and charges sales tax at the same rate. Calculate:

1) The price paid by the customer.

2) The VAT paid by the retailer.

Answer 1

Marked price of an article = Rs 500

Discount is given by the wholesaler = `500 - 20% "of"  500`

`= 500 - 20/100 xx 500`

= 500 - 100

= 400

Sale tax charged by the  wholesaler = 12.5% of 400

`= 12.5/100 xx 400`

= 50

Sales tax paid by the retailer = Rs 50

Sale price for the retailer = Rs 500

Sales tax charged by the retailer = `12.5% "of"  500`

`= 12.5/100 xx 500`

= 50

Sales tax paid by the retailer = Rs 50

Sale price for the retailer = Rs 500

Sales tax charged by the retailer = 12.5% of 500

`= 12.5/100 xx 500`

= 62.50

Price paid by the customer = Rs 500 + Rs 62.50 = Rs 562.50

VAT paid by the retailer = Rs 62.50 - Rs 50 = Rs 12.50