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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.
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.
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