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: (i) distributor (ii) trader.

• A. (i) Rs. $137.50$ (ii) Rs. $71.22$
• B. (i) Rs. $187.50$ (ii) Rs. $62.50$
• C. (i) Rs. $263.50$ (ii) Rs. $50.50$
• D. None of these
  

Answer 1

Answer: (B)

(i) Rs. $187.50$ (ii) Rs. $62.50$

(1)Distributer

VAT=Out put Tax-Input tax

Out put tax$=12.5\%of7500$$=\frac{12.5}{100}\times 7500=Rs.937.50$

Input Tax$=12.5\%of6000$$=\frac{12.5}{100}\times 6000=Rs.750$

$VAT=937.50-750=187.50$

(2)Retailer

VAT=Out put Tax-Input tax

in put tax$=12.5\%of7500$$=\frac{12.5}{100}\times 7500=Rs.937.50$

output Tax$=12.5\%of8000$$=\frac{12.5}{100}\times 8000=Rs.1000$

$VAT=1000-937.50=62.50$