Question

The cost of an article is ₹ 6,000 to a distributor. He sells it to a trader for ₹ 7,500 and the trader sells it to a customer for ₹ 8,000. If the VAT rate is 12.5%; find the VAT paid by the :

1) distributor

2) trader

Answer 1

Cost price for distributor = Rs 6,000

Tax paid by distributor = 12.5% of Rs 6,000

`= 12.5/100 xx 6000 = "Rs"  750`

Sale price for distributor= Rs 7,500

Tax charged by distributor= 12.5% of Rs 7,500

`= 12.5/100 xx 7500 = "Rs"  937.50` 

VAT paid by distributor = Rs 937.50 – Rs 750

= Rs 187.50

Sale price for trader = Rs 8,000

Tax charged by trader = 12.5% of Rs 8,000

`= 12.5/100 xx 8000 = "Rs"  1000`

VAT paid by trader = Rs 1000 - Rs 937.50= Rs 62.50