A buys an article for Rs.8,000 and sold it to B at 20% profit. If the rate of tax under VAT is 8%, find : (i) tax paid by A (ii) tax charged by A (iii) VAT paid by A

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Solution

C.P. of an article for A = Rs. 8000
Tax rate = 8%
(i) Tax paid by A = C.P. $\times \frac{R a t e}{100}$
= Rs. 8000 $\times \frac{8}{100}$ Rs. 640
(ii) C.P. of an article for B = Rs. 8000 + 20%
= Rs.8000+ 1600 = Rs. 9600
Tax charged by A or = C.P. $\times \frac{R a t e}{100}$
Tax paid by B Rs. 9600 $\times \frac{8}{100} = R s . 768$
(iii) VAT paid by A = Tax charged - Tax paid
= Rs.768 - Rs.640 = Rs.158

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