A manufacturer A sells an article to a trader B for ₹ 20,000. Trader B sells to a trader C at a profit of ₹ 5000 and trader C sells it to a customer at a profit of ₹ 6000, if the rate of VAT is 10 % , find the amount of tax ( under VAT) received by the State Government on the sale of this article

₹ 2000

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₹ 3100

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₹ 1100

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₹ 2500

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Solution

The correct option is B
₹ 3100

Amount of Tax collected by the manufacturer A = 10 % of 20,000
= $\frac{10}{100} \times$ 20,000
= ₹ 2000

Trader B makes a profit of ₹ 5000; the value added by the trader B = ₹ 5000
Amount of VAT to be paid by trader B = $\frac{10}{100} \times$ 5000
= ₹ 500

Trader C makes a profit of ₹ 6000; the value added by the Trader C = ₹ 6000
Amount of VAT to be paid by trader C = $\frac{10}{100} \times$ 6000
= ₹ 600

$∴$ The amount of tax ( under VAT) received by the Government
= ₹(2000 + 500 + 600)
= ₹ 3100

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