A manufacturer listed the price of his goods at ₹ 160 per article. He allowed a discount of 25% to a wholesaler who in his turn allowed a discount of 20% on the listed price to a retailer. The rate of sales tax on the goods is 10%. If the retailer sells one article to a consumer at a discount of 5% on the listed price, then find
(i) the VAT paid by the wholesaler.
(ii) the VAT paid by the retailer.
(iii) the VAT received by the Government.
Solution:
List price (MP) of the goods = ₹ 160 per article
Rate of discount = 25%
(i) VAT paid by the wholesaler = ₹ 12.80 – ₹ 12 = ₹ 0.80
(ii) VAT paid by the retailer = 15.20 – 12.80 = ₹ 2.40
(iii) Total VAT paid to the Govt. = ₹ 15.20