Question

A manufacturing company sold a commodity to its distributor for Rs. 22,000 including VAT. Thedistibutor sold the commodity to a retailer for Rs. 22,000 excluding tax and the retailer sold it to a consumer for Rs. 25,000 plus tax (under VAT). If the rate of tax at each stage is 10%, what was the :(i) sale price of the commodity for the manufacturer ?(ii) the amount of VAT paid by the retailer?

Answer 1

(i) Let the sale price of the commodity for the manufacturer be Rs. $x$.
$\therefore x+\frac{10x}{100}=22,000$ [$\because$ Tax = 10%]
On solving, we get: $x=20,000$
$\therefore$ The sale price of the commodity for the manufacturer = Rs. 20,000.
(ii) For the retailer:
C.P. = S.P. for distributor = Rs. 22,000
and, S.P. = Rs. 25,000
$\therefore$ VAT = Tax on (S.P. - C.P.)
$=\frac{10}{100}\times$ Rs. $(25,000-22,000)$
$=$Rs. 300.