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Question
In the tax period ended March 2015, M/S Hari Singh & Sons purchased floor tiles worth ₹ 800000 taxable at 7.5% and sanitary fittings worth ₹ 750000 taxable at 10%. During this period, the sales turnover for floor tiles and sanitary fittings is worth ₹ 840000 and ₹ 920000 respectively. However, the floor tiles worth ₹ 60000 were returned by the firm during the same period. Calculate the tax liability (under VAT) of the firm for this tax period.
Solution
Cost of floor tiles = ₹ 800000
Rate of tax = 7.5%
= `(15)/(2)%`
∴ VAT
= `(800000 xx 15)/(100 xx 2)`
= ₹60000
Cost of sanitary fittings = ₹750000
Rate of VAT = 10%
Total VAT
= ₹`750000 xx (10)/(100)` = ₹75000
∴ Total input
= ₹60000 + ₹75000
= ₹135000
On the sale of floor tiles for = ₹840000
Rate of VAT = `(15)/(2)%`
Total VAT
= `840000 xx (15)/(100 xx 2)`
= ₹63000
and on sale of sanitary fittings = ₹920000
Rate of VAT = 10%
∴ Total VAT
= `₹920000 xx (10)/(100)` = ₹92000
Total input tax
= ₹63000 + ₹92000
= ₹155000
Return of floor tiles worth
=₹60000
Liability of tax of the firm
= 155000 – (135000 + 4500)
= ₹155000 – ₹139500
= ₹15500.
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