A buys some goods for Rs.4,000 and sold them to B for Rs.5,000. B sold these goods to C for Rs. 6,000. If the rate of tax (under VAT) at each stage is 5%, find (i) VAT paid by A (ii) VAT paid by B

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Solution

C.P. of some goods for A = Rs. 4000
C.P. of some goods for B = Rs. 5000
and C.P. for C = Rs. 6000
Rate of VAT in each case = 5%
$∴$ VAT charged by A = Rs. 4000 $\times \frac{5}{100}$ = Rs. 200
VAT charged by B = Rs. 5,000 $\times \frac{5}{100}$ = Rs. 250
VAT charged by C = Rs. 6,000 $\times \frac{5}{100}$ = Rs. 300
(i) Now VAT paid by A = Rs. 250 - Rs. 200 = Rs.50
(ii) Now VAT paid by B = Rs. 300 - Rs. 250 = Rs.50

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