Question

A shop keeper sells an article at its list price $Rs3,000$ and charges sale tax at the rate of $12\%$. If the VAT paid by the shopkeeper is $Rs72$ , at what price did the shopkeeper buys the article inclusive of sales tax?

• A. $2,688$
• B. $2,600$
• C. $2,500$
• D. None of these

Answer 1

Answer: (A)

$2,688$

$\Rightarrow$ Output tax = Tax realized by the retailer from the customer $=12\%$ of $3000$.

$\Rightarrow$ Output Tax $=$ Rs. $360$.

$\Rightarrow$ Let the price of the article charged by the wholesaler be P before tax.

$\Rightarrow$ Then the input tax $=12\%$ of P $=\frac{12P}{100}=\frac{3P}{25}$

$\Rightarrow$ $VAT=Outputtax-Inputtax$

$\Rightarrow$ $72=360-\frac{3P}{25}$

$\Rightarrow$ $\frac{3P}{25}=360-72$

$\Rightarrow$ $\frac{3P}{25}=288$

$\Rightarrow$ $P=288\times \frac{25}{3}$

$\therefore$ $P=Rs.2400$

$\Rightarrow$ Then, $Inputtax=\frac{3\times 2400}{25}=Rs.288$

$\Rightarrow$ The required price = P + Input tax = Rs. 2400+288 = $Rs.2,688$.