A manufacturer lists the price of the goods at Rs.240 per article. The wholesaler gets a discount of 25% on the goods from the manufacturer.
The retailers are allowed a discount of 15% on the list price by the wholesaler. The prescribe rate of sale tax at all stages is 8%. A customer buys an article from the retailer at the listed price.
Find the VAT paid by the retailer & wholesaler
To find the VAT (Value Added Tax) paid by the retailer and wholesaler, we need to calculate the selling price at each stage and then calculate the VAT based on the prescribed rate of 8%.
1. Manufacturer to Wholesaler:
- The manufacturer lists the price of the goods at Rs. 240 per article.
- The wholesaler gets a discount of 25%. So, the price the wholesaler pays to the manufacturer is Rs. 240 - (25% of Rs. 240) = Rs. 240 - Rs. 60 = Rs. 180.
2. Wholesaler to Retailer:
- The wholesaler allows a discount of 15% on the list price to the retailer. So, the price the retailer pays to the wholesaler is Rs. 180 - (15% of Rs. 180) = Rs. 180 - Rs. 27 = Rs. 153.
3. Retailer to Customer:
- The retailer sells the article to the customer at the listed price, which is Rs. 240.
Now, we can calculate the VAT paid by each party:
1. VAT paid by the Wholesaler:
- The Wholesaler bought the article for Rs. 180 from the manufacturer.
- VAT paid by the Wholesaler = 8% of Rs. 180 = 0.08 * 180 = Rs. 14.40.
2. VAT paid by the Retailer:
- The Retailer bought the article for Rs. 153 from the wholesaler.
- VAT paid by the Retailer = 8% of Rs. 153 = 0.08 * 153 = Rs. 12.24.
Therefore, the VAT paid by the wholesaler is Rs. 14.40 and the VAT paid by the retailer is Rs. 12.24.