a) A shopkeeper purchases an article for Rs 7,000 and sells it to a customer for Rs 8,200. If the VAT rate is 6%, find the VAT paid by the shopkeeper.

b)A shopkeeper purchased an item of Rs 100 at 8% VAT and sells it at Rs 120 to the customer and customer also pays 8% VAT to the shopkeeper. How much amount did the shopkeeper deposit to the Government as VAT?

[6 MARKS]

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Solution

Each subpart: 3 Marks

a) VAT paid by the shopkeeper = 6% of Rs (8,200 - 7,000)
$= R s \frac{6}{100} \times 1, 200 = R s 72$

b)
$\begin{matrix} S h o p k e e p e r & C u s t o m e r C . P . & R s 100 & R s 120 V A T = 8 % T a x c h a r g e d & V A T C h a r g e d & R s 8 & R s 9.60 V A T p a i d t o t h e g o v e r n m e n t & R s 8 & R s 1.60 \end{matrix}$
Total VAT paid to the government = Rs 8 + Rs 1.6 = Rs 19.2

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Each subpart: 3 Marks a) VAT paid by the shopkeeper = 6% of Rs (8,200 - 7,000) =Rs6100×1,200=Rs 72 b) ShopkeeperCustomerC.P.Rs 100Rs 120VAT=8% Tax chargedVATChargedRs 8Rs 9.60VATpaidtothegovernmentRs 8Rs 1.60 Total VAT paid to the government = Rs 8 + Rs 1.6 = Rs 19.2