We will discuss here about some of the problems on value added tax (VAT).

**1.** Kylie buys an article for $ 10000 and pays 7% tax. He sells the same article for $ 13000 and charges 9% tax. Find the VAT paid by Kylie.

**Solution:**

Cost of the article = 10000

Tax paid by Kylie = 7% of $ 10,000

= $ 7/100 × 10000

= $ 700

Selling price of the article = $ 13000

Tax charged at 9% = 9% of 13000

= $ 9/100 × 13000

= $ 1170

Therefore, VAT = tax recovered on sale - Tax paid on purchase.

= $ 1170 - $ 700

= $ 470

Therefore, VAT = $ 470

**2.** A retailer buys an article from the wholesaler at $80 and the wholesaler charges a sales tax at the prescribed rate of 8%. The retailer fixes the price at $ 100 and charges sales tax at the same rate. Apply value added tax system of sales tax calculation to answer the following questions.

(i) What is the price that a consumer has to pay to buy the article?

(ii) Find the input tax and output tax for the retailer.

(iii) How much VAT does the retailer pay to the government?

**Solution:**

(i) Here, the price P = $100, the rate of sales tax r% = 8%

Therefore, cost price for the consumer = P(1 + r/100)

= $100 × (1 + 8/100)

= $100 × 108/100

= $108

(ii) Input tax = tax paid by the retailer to the wholesaler

= 8% of $80

= 8/100 × $80

= $64/10

= $6.40

Output tax = tax realised by the retailer from the consumer

= 8% of $100

= 8/100 × $100

= $8

(iii) Value added tax paid by the retailer = output tax – input tax

= $8 - $6.40

= $1.60

**3.** A shopkeeper sells an article at its marked price $ 7500
and charges sales-tax at the rate of 12% from the customer. If the shopkeeper pays
a VAT of $ 180, calculate the price inclusive of tax paid by the shopkeeper.

**Solution:**

Since, the shopkeeper sells the article for $ 7500 and charges sales-tax at the rate of 12%.

Therefore, the tax charged by the shopkeeper = 12% of $ 7500

= \(\frac{12}{100}\) × 7500

= $ 900

Since, VAT = Tax charged – Tax paid

Or, $ 180 = $ 900 – Tax paid

Or, Tax paid by the shopkeeper = $ 900 - $ 180 = $ 720

If the shopkeeper buys the article for $ x

Tax on it = 12% of x = $ 720

Or, \(\frac{12}{100}\) × x = $ 720

Or, x = $ 6000

Therefore, the price inclusive of tax paid by the shopkeeper = $ 6000 + $ 720 = $ 6720

**4.** A manufacturer printed the price of his goods as $120 per
article. He allowed a discount of 30% to the wholesaler who in his turn allowed
a discount of 20% on the printed price to the retailer. If the prescribed rate
of sales tax on the goods is 10% and the retailer sells it to the consumer at
the printed price then find the value added tax paid by the wholesaler and the
retailer.

**Solution:**

For the manufacturer, the price of the article at which it is sold = Printed price – discount of the wholesaler

= $ 120 – 30% of $ 120

= $ 120 - $ 120 × 30/100

= $ 120 - $ 36

= $ 84

Therefore, input tax for the wholesaler = 10% of 84 = 10/100 × $ 84 = $ 8.40

For the wholesaler, the price of the article at which it is sold = Printed price – discount to the retailer

= $ 120 - 20% of 120

= $ 120 - $ 120 × 20/100

= $ 120 - $ 24

= $ 96

Therefore, output tax for the wholesaler = 10% of 96 = 10/100 × $ 96 = $ 9.60

Therefore, VAT payable for the wholesaler = output tax – input tax

= $ 9.60 - $ 8.40

= $ 1.20

For the retailer, the price of the article at which it is sold = printed price = $ 120

Therefore, output tax for the retailer = 10% of 120

= 10/100 × $ 120

= $ 12.

Input tax for the retailer = output tax for the wholesaler

= $ 9.60

Therefore, VAT payable by the retailer = output tax – input tax

= $ 12 - $ 9.60

= $ 2.40

Therefore, VAT paid by the wholesaler is $ 1.20 and that paid by retailer is $ 2.40

**● Sales Tax and Value Added Tax**

**Calculation of Sales Tax****Sales Tax in a Bill****Mark-ups and Discounts Involving Sales Tax****Profit Loss Involving Tax****Value Added Tax****Problems on Value Added Tax (VAT)****Worksheet on Printed Price, Rate of Sales Tax and Selling Price****Worksheet on Profit/Loss Involving Sales Tax****Worksheet on Sales Tax and Value-added Tax****Worksheet on Mark-ups and Discounts Involving Sales Tax**

**10th Grade Math****From Problems on Value Added Tax (VAT) to HOME PAGE**

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