Question

A retailer buys an article for Rs. 800 and pays the sales-tax at the rate of 8$\%$. The retailer sells the same article to a customer for Rs. 1,000 and charges sales-tax at the same rate. Find:
(i) the price paid by a customer to buy this article
(ii) the amount of VAT paid by the retailer

• A. (i) Rs. $1,080$ (ii) Rs. $16$
• B. (i) Rs. $1,160$ (ii) Rs. $14$
• C. (i) Rs. $1,170$ (ii) Rs. $12$
• D. None of these
  

Answer 1

Answer: (A)

(i) Rs. $1,080$ (ii) Rs. $16$

Given that, a retailer buys an article for $Rs.800$ and pays $8\%$ sales-tax.

Also, the retailer sells the article for $Rs.1000$, charging the sales-tax at the same rate.

To find out: (i) The price paid by the customer to buy the article

(ii) The amount of VAT paid by the retailer.

$\left(i\right)$ We know that, selling price of the article is $Rs.1000$

The customer had to also pay a sales-tax of $8\%$.

$\therefore$ Price paid by the customer $=1000+8\%of1000$

$\Rightarrow 1000+\frac{8}{100}\times 1000=1000+80$

$\therefore$ The price paid by the customer to buy the article $=Rs.1080$.

$\left(ii\right)$ We know that, the retailer bought the article for $Rs.800$

The retailer also paid a sales-tax of $8\%$.

$\therefore$ Tax paid by the retailer $=8\%of800$

$\Rightarrow \frac{8}{100}\times 800=Rs.64$

Also, the retailer charged a sales-tax of $8\%$ on the selling price of the article, $Rs.1000$

Hence, the sales-tax received $=8\%of1000$

$\Rightarrow \frac{8}{100}\times 1000=Rs.80$

$\therefore$ VAT paid by the retailer $=80-64=Rs.16$

Hence, the VAT paid by the retailer is $Rs.16$.