Question

A manufacturer marks an article at Rs. 5,000. He sells this article to a wholesaler at a discount of 25% on the marked price and the wholesaler sells it to a retailer at a discount of 15% on its marked price. If the retailer sells the article without any discount and at each stage the sales-tax is 8%, calculate the amount of VAT paid by:
(i) The wholesaler (ii) The retailer

• A. $\left(i\right)Rs.50$ $\left(ii\right)Rs.40$
• B. $\left(i\right)Rs.40$ $\left(ii\right)Rs.60$
  
• C. $\left(i\right)Rs.30$ $\left(ii\right)Rs.70$
  
• D. $\left(i\right)Rs.20$ $\left(ii\right)Rs.40$
  

Answer 1

The correct option is B $\left(i\right)Rs.40$ $\left(ii\right)Rs.60$

Mark price =Rs.5000

Manufacture sell the article to the wholesaler at a discount of =25%

Price of the article after discount$=5000-\frac{25}{100}\times 5000$

$\Rightarrow 5000-1250=Rs.3750$

Rate of sales tax=8%

$\therefore$Tax paid by the wholesaler=8% of 3750

$\Rightarrow \frac{8}{100}\times 3750=Rs.300$

Wholesaler sell the article to retailer at a discount of 15% on M.P

price of the article after discount$=5000-\frac{15}{100}\times 5000$

$\Rightarrow 5000-750=Rs.4250$

Rate of sales tax =8%

$\therefore$Tax paid by the retailer=8% of $Rs.4250$.

$\Rightarrow \frac{8}{100}\times 4250=Rs.340$

(i)VAT paid by the wholesaler

VAT=tax paid by the retailer-tax paid by the wholesaler

$\text{VAT}=340-300=Rs.40$

(ii)VAT paid by the Retailer

Retailer sell the article at marked price at rate of sales tax=8%

$\therefore$Tax earned by the retailer=8% of 5000

$\Rightarrow \frac{8}{100}\times 5000=Rs.400$

VAT=Tax earned by the retailer-Tax paid by the retailer

$\text{VAT}=400-340=Rs.60$