Question

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 to a customer for Rs. 8,000. If the VAT rate is 12.5%; find the VAT paid by the manufacturer.
(i) distributor (ii) trader

• A. $\left(i\right)132.50$ $\left(ii\right)51.50$
• B. $\left(i\right)179.50$ $\left(ii\right)31.50$
• C. $\left(i\right)187.50$ $\left(ii\right)62.50$
• D. $\left(i\right)120.50$ $\left(ii\right)44.50$

Answer 1

The correct option is C $\left(i\right)187.50$ $\left(ii\right)62.50$

(1) Distributer

Output tax=12.5% of 7500$=\frac{12.5}{100}\times 7500=Rs.937.50$

Input tax=12.5 % of 6000$=\frac{12.5}{100}\times 6000=rs.750$

VAT=output tax-input tax

$VAT=937.50-750=Rs.187.5$

(2)Trader

Output tax=12.5% of 8000$=\frac{12.5}{100}\times 8000=Rs.1000$

Input tax=12.5% of 7500$=\frac{12.5}{100}\times 7500=937.50$

VAT$=1000-937.50=Rs.62.5$