A manufacturer marks an article for Rs. 5000. He sells it to a wholesaler at a discount of 25% on the marked price and the wholesaler sells it to the retailer at a discount of 15%. The retailer sells it 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

Question

A manufacturer marks an article for Rs. 5000. He sells it to a wholesaler at a discount of 25% on the marked price and the wholesaler sells it to the retailer at a discount of 15%. The retailer sells it 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

hoblos · Answer

i) the wholesaler get a 25% discount 
so he pays to the manufacturer 75% of the Rs 5000
75% of 5000 is 3750
the VAT is 8%
8% of 3750 is   Rs 300

ii) the retailer get a 15% discount
 so he pays to the manufacturer  85% of 5000
85% of 5000 is 4250
the VAT is 8%
8% of 4250 is    Rs 340

anonymous · Answer

No offence, but are you sure that's right? you either calculate VAT on the profit or as the difference between tax recovered and tax paid.

anonymous · Answer

or so i thought.