The cost of an article is Rs.6,000 to a distributor. He sells it to a trader for Rs.7,500 and the trader sells it further to a customer for Rs. 8,000. If the rate of tax under VAT is 8%; find the VAT paid by the : (i) distributor (ii) trader

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Solution

Cost price of an article to a distributor = Rs.6000 and selling price of distributor = Rs. 7500 and selling price of trader = Rs.. 8000 Rate of VAT = 12.5% = $\frac{25}{2}$ % Now,,VAT for two distributor = Rs. $\frac{6000 \times 25}{100 \times 2}$ = Rs. 750 and VAT for two trader = Rs. $\frac{7500 \times 25}{100 \times 2}$ = Rs. 937.50 and VAP for customer = $\frac{8000 \times 25}{100 \times 2}$ Rs.1000 (i) Now VAT paid by distributor = Rs. 937.50-Rs.750 = Rs. 187.50 (ii) and VAT paid by trader Rs. 1000- Rs.937.50 = Rs.62.50

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