# VAT (Value Added Tax)....Manufacturer A sells a washing machine to a trader B for Rs 12,500. Trader B sells it to a trader C at a profit of Rs 800 and trader C sells it to a customer at a profit of...

VAT (Value Added Tax)....

Manufacturer A sells a washing machine to a trader B for Rs 12,500. Trader B sells it to a trader C at a profit of Rs 800 and trader C sells it to a customer at a profit of Rs 1,300. If the rate of VAT is 8% , find:

i) the amount of VAT received by the state govt on the sale of this machine,

ii) the amount that the consumer pays for the machine.

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The total amount of VAT paid should be Rs 1168. The final buyer should be paying Rs 22968 for the washing machine. Here is how to derive this answer:

A sells the washing machine to B for 12500 plus Rs 1000 in VAT (12500*.08). So B pays Rs 13500.

B adds to that Rs 800 of profit and sells it to C. The VAT on this transaction is 800*.08 = 64. So now the total VAT so far is 1064. The price that C pays is 13500 + 800 + 64 = 21564.

C adds Rs 1300 to the price, making 22864. He pays VAT on the 1300 (1300*08 = 104). So now the total VAT is 1168 Rupees. 22864 + 104 = 22968

The manufacturer sells the washing machine at Rs 12500 to B. So Rs 12500 is incusive of 8% Vat.

B should get a profit of Rs 800 and sell at a price which includes that vat also . So he sells the WM at Rs [12500+800(1+8/100)]

Similarly C should sell for price with profit Rs 1300 means his selling price including a Vat of Rs1300*8/108 should be

Rs[12500+800(1+8/100)+1300(1+8/100)] = Rs(12500 +2100*108/100)= Rs(12500+2468) = Rs14768 which is inclusive of 8%

Therefore the 8% included VAT paid is 14768*8/108 = Rs 1093.93 of which

12500*8/108 = 925.93 is paid by manufacture,

(800+8%800)*8/108 = Rs 64 Paid by B and

(1300+8%of1300)*8/108 = Rs 104 is paid by C.

And the consumer pays 925.93+64+104 = Rs1093.93 VAT (through the sellers to the the government) which is included in the price Rs14768.

Here, selers pay the VAT to government, but they recover it from the consumer.