A manufacturer marks an article for ₹ 5000. He sells it to a wholesaler at a discount of 25% on the marked price and the wholseller sells it to a retailer at a discount of 15% on the marked price. The retailer sells it to a consumer at the marked price and at each stage the VAT is 8%.
Calculate the amount of VAT received by the Government from :
(i) the wholesaler.
(ii) the retailer.
Solution:
Marked price (M.P.) of an article = ₹ 5000
Discount given to the wholesaler = 25%
Cost price of wholesaler or S.P. of the manufacturer
(i) VAT received from the wholesaler = ₹ 340 – ₹ 300 = ₹ 40
(ii) and VAT received by the retailer = ₹ 400 – ₹ 340 = ₹ 60