A manufacturer X sells a refrigerator to a trader Y for Rs. 22500. The trader Y sells it to a trader Z at a profit of Rs. 1250 and trader Z sell it to a consumer at a profit of Rs. 1000. If the rate of value added tax (VAT) is 4%, find the total amount of tax (under VAT ) received by the government on the scale of the refrigerator.
Rs. 990
We have,
Amount of tax collected by the manufactures X = 4% of Rs. 22500
= Rs. (4×22500100) = Rs. 900.
Since the trader Y earns a profit of Rs. 1250.
So, the value added by the trader Y = Rs. 1250.
Amount of VAT to be paid by trader Y = 4% of Rs. 1250
= Rs. (4100×1250) = Rs. 50
The trader Z earns a profit of Rs.1000. So, the value added by the trader Z = Rs. 1000
So, Amount of VAT to be paid by trader Z = 4%of Rs. 1000 = Rs. 40.
Hence, total amount of tax (under VAT) received by government = Rs. 900 + Rs. 50 + Rs. 40 = Rs. 990.