A manufacturer X sells a refrigerator to a trader Y for ₹ 22500. The trader Y sells it to a trader Z at a profit of ₹ 1250 and trader Z sell it to a consumer at a profit of

₹ 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. 1550

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Rs. 980

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Rs. 990

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Rs. 900

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Solution

The correct option is C
Rs. 990

We have,

Amount of tax collected by the manufacturer X = $4 %$ of ₹ 22500

= ₹ $(4 \times \frac{22500}{100})$ = ₹ 900.

Since the trader Y earns a profit of ₹ 1250.

So, the value added by the trader Y = ₹ 1250.

Amount of VAT to be paid by trader Y = 4% of ₹1250

= ₹ $(\frac{4}{100} \times 1250)$ = ₹ 50

The trader Z earns a profit of Rs.1000. So, the value added by the trader Z = ₹ 1000

So, Amount of VAT to be paid by trader Z = $4 %$ of ₹ 1000 = ₹ 40.

Hence, total amount of tax (under VAT) received by government = ₹ 900 + ₹ 50 + ₹ 40 = ₹ 990.

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