A manufacuturer marks an article for Rs 5,000. He sells it 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 the marked price. The retailer sells it to a consumer at the marked price and at each stage the VAT is 8%. Calculate the amount of VAT received by the Government from :
(i) The wholesaler (ii) The retailer
[4 MARKS]

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Solution

Each subpart: 2 Marks
Rate of VAT = 8%
$\begin{matrix} S t e p s & M a n u f a c t u r e r & W h o l e s a l e r & R e t a i l e r & C o n s u m e r M . P . & R s 5, 000 & R s 5, 000 & R s 5, 000 D % & 25 % & 15 % & - D i s c o u n t & R s 1, 250 & R s 750 & - S a l e P r i c e & R s 3, 750 & R s 4, 250 & R s 5, 000 & T a x p a i d b y T a x c h a r g e d a t & ↓ 8 % & ↓ 8 % & ↓ 8 % & C o n s u m e r = R s 400 T h e M . P . & = R s 300 & = R s 340 & = R s 400 T a x p a i d t o G o v e r n m e n t & R s 300 & R s 40 & R s 60 \end{matrix}$
(i) Amount of VAT received by Government from the wholesaler = Rs 40
(ii) Amountof VAT received by Government from the retailer = Rs 60

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