During a financial year, a shopkeeper purchased goods worth Rs. 4,15,000 and paid a total tax of Rs. 38,000. His sales during this period consisted of a taxable turnover of Rs. 50,000 for goods taxable at 5% and Rs. 3,20,000 for goods taxable at 12%. He also sold tax exempted goods worth Rs. 45,000 during this period. Calculate his tax liability (under VAT) for the financial year.

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Solution

$∵$ Turnover of goods taxable at 5% = Rs. 50,000
$∴$ Tax charged = 5% of Rs.50,000
$= \frac{5}{100} \times$ Rs. 50,000 = Rs. 2,500
$∵$ Turnover of goods taxable at 12% = Rs. 3,20,000
$∴$ Tax charged = 12% of Rs. 3,20,000
$= \frac{12}{100} \times$ Rs. 3,20,000 = Rs.38,400
Tax exempted sale = Rs. 45,000
Total tax charged = Rs. 2,500 + Rs. 38,400 = Rs. 40,900
Tax paid = Rs. 38,000
$∴$ Tax liability (under VAT) = Total tax charged -Tax paid
= Rs. 40,900 - Rs. 38,000 = Rs. 2,900
Tax exempted sale means the sale which is not liable for tax under VAT.

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