Question

A wholesaler purchased electric material for Rs.$1,50,000$. He sold it to a retailer for Rs.$1,80,000$. Retailer sold the same material to customer for Rs.$2,20,000$. Find the M-VAT payable at every stage of trading at the rate of $12.5$%.

Answer 1

For wholesaler:
Purchase price $=$Rs.$1,50,000$
Selling Price$=$ Rs.$1,80,000$
Tax charged on sale price $=12.5$% of Rs.$1,80,000$
$=\frac{12.5}{100}\times 1,80,000$
$=$Rs.$22,500$
$\therefore$ VAT paid by wholesaler $=$ Tax charged on sale price $-$ Tax paid on purchase price
$=$ Rs.$22,500-$ Rs.$18,750$
$=$Rs.$3,750$
For retailer:
Purchase Price $=$Rs.$1,80,000$
Selling price $=$Rs.$2,20,000$
Tax paid on purchase price $=12.5$% of Rs.$1,80,000$
$=\frac{12.5}{100}\times 1,80,000$
$=$Rs.$22,500$
Tax charged on selling price $=$ RS.$12.5$% of Rs.$2,20,000$
$=\frac{12.5}{100}\times 2,20,000$
$=$Rs.$27,500$
$\therefore$ VAT paid by retailer
$=$ Tax charged on selling price $-$ Tax paid on purchase price
$=$Rs.$27,500-$ Rs.$22,500$
$=$Rs.$5,000$