Problems on VAT (Value Added Tax) with step by step solutions are available on this page. Thus the students who are looking for the worksheets on Sales Tax and Value Added Tax can get them on this page. The problems on Value Added Tax (VAT) will help the students of 10th grade to score the highest marks in the exams. Use them as a part of the preparation and clear your doubts if any at the moment itself. Subject Experts have designed these VAT Example Problems keeping in mind the IQ Levels of Various Students.
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Value Added Tax Problems and Solutions PDF
Example 1.
A man buys an article from the wholesaler at $70 and the wholesaler charges a sales tax at the prescribed rate of 6%. The man fixes the price at $ 200 and charges sales tax at the same rate. Apply a value added tax system of sales tax calculation to answer the following questions.
(i) The price that a consumer has to pay to buy the article?
(ii) Find the input tax and output tax for the man.
(iii) How much VAT does the man pay to the government?
Solution:
(i) Here, the price P = $200, the rate of sales tax r% = 6%
Therefore, cost price for the consumer = P(1 + r/100)
= $100 × (1 + 6/100)
= $100 × 106/100
= $106
(ii) Input tax = tax paid by the man to the wholesaler
= 7% of $70
= 8/100 × $70
= $5.6
Output tax = tax realised by the retailer from the consumer
= 7% of $200
= 7/100 × $200
= $14
(iii) Value added tax paid by the man = output tax – input tax
= $14 – $5.6
= $8.4
Example 2.
A manufacturing company B sells a computer to a distributor C For Rs 21000 including sales tax. The distributor C sells it to a retailer E for Rs 30750 excluding tax and the retailer sells it to a consumer for Rs 22400 plus tax. If the rate of sales tax (under VAT) is 8%, find
(i) The cost price of a computer for the distributor C.
(ii) The amount of a tax (under VAT) paid by C.
(iii) The amount of a tax (under VAT) paid by E.
(iv) The amount of a tax received by the State Government on a sale of this computer.
Solution:
(i) Let the cost price of the computer for the distributor C be Rs x, rate of sales
tax = 8%.
Therefore, Tax charged by B = 8% of Rs x = x/8
Therefore, The selling price of the computer by B = Rs x + x/8 = 9x/8
As the selling price of the computer by B = Rs 21000
we have
9x/8 = 21000
9x = 21000 × 8
x = 21000 × 8/9
x = 18666.6
Therefore, The cost price of the computer for the distributor C = Rs 18666.6.
(ii) VAT collected by B = Rs x/8 = 18666.6/8 =
= 2333.3
Since the distributor C sold the computer for Rs 30750,
tax collected by C = 8% of Rs 30750
= 8/100 × 30750 = 2460
Therefore, Tax to be paid by C = Rs 2460 – Rs 2333.3 = Rs 126.7
(iii) As the retailer E sold the computer for Rs 22400,
Tax collected by E = 8% of Rs 22400
= 8/10 × 22400
= 17920
Therefore, Tax to be paid by E = Rs 17920 – Rs 2460 = Rs 15460
(iv) The amount of tax (under VAT) received by the Government
= Rs 18666.6 + Rs 126.7 + Rs 15460
= Rs 24253.3
Example 3.
Kiran buys a kitchen set at a rebate of 25% on the printed price. He spends Rs 80 on transportation of the kitchen set. After charging sales tax (under VAT) at the rate of 6% on the printed price, he sells the kitchen set for Rs 1256. Find his profit percentage.
Solution:
Let the printed price of the kitchen set be Rs P.
Sales tax (under VAT) is charged at 6% on the printed price,amount of VAT = 6/100 of P = 6P/100
Therefore selling price= P + 6P/100 = 106P/100
According to given(106/100) P = 1256
P = 1184.9
Therefore, The printed price of the kitchen set = Rs 1184.9
As the rebate is 25% on the printed price,
cost price of the kitchen set = Rs 1184.9 ×(1 -25/100)
= 1184.9 × 75/100
= 888
As Rs 80 is spent on transportation,
the total cost price of the kitchen set = Rs 888 + Rs 80 = Rs 968
Therefore, The amount of profit = printed price – total cost price
= Rs 1184.9 – Rs 968 = Rs 216.9
Therefore, Profit percentage = 216.9/968 × 100 = 22.40%
Example 4.
The price of a car is Rs 2620 inclusive of sales tax (under VAT) at the rate of 10% on its listed price. A buyer asks for a discount on the listed price so that after charging the VAT, the selling price becomes equal to the listed price. Find the amount of discount which the seller has to allow for the deal.
Solution:
Let the listed price of the bicycle be Rs P.
Sales tax (under VAT) = 10% of Rs P = 10/100 of Rs P = P/10
Therefore Selling price = P + P/10 = 11P/10
According to given that
11/10 P = 2620
P = 2381.8
Therefore, List price of the bicycle is Rs 2381.8
Let the amount of discount be Rs x.
Therefore, The reduced price of the bicycle = Rs (2381.8 – x).
Sales tax (under VAT) = 10% of Rs (2381.8 – x) = Rs 2381.8 – x /10
New selling price = Rs (2381.8 – x) + Rs (2381.8 – x/10)
= 11/10(2381.8 – x)
According to given,
11/10 (2381.8 – x) = 2381.8
2381.8 – x = 2381.8 × 10/11
2381.8 – x = 2164.5
x = 217.3
Therefore, The amount of discount = Rs 217.3
Example 5.
Ms. Leena goes to a shop to buy a shirt which costs Rs 635. The rate of the sales tax (under VAT) is 4%. She tells the shopkeeper to reduce the price to such an extent that she has to pay Rs 635, inclusive of VAT. Find the reduction needed in the price of the shirt.
Solution:
Let the reduced price of a shirt be Rs x.
Sales tax (under VAT) on Rs x = (x + 4/100) = 104x/100
Therefore, Amount paid by Ms. Leena = (x + 104x/100)
= 204x/100
According to given
204x/100 = 634
204x = 634 × 100
x = 634 × 100/204
x = 310.7
Therefore, The reduced price of a shirt = Rs 310.7
Therefore, The reduction needed at the price of the shirt = Rs 664 – Rs 310.7 = Rs 353.3
Example 6.
A shopkeeper buys flowers whose list price is Rs 550 at some rate of discount from a wholesaler. He sells the flowers to a consumer at the list price and charges sales tax at the rate of 2%. If the shopkeeper has to pay a VAT of Rs 2.70, find the rate of discount at which he bought the flowers from the wholesaler.
Solution:
Let the amount of discount be Rs x.
As the shopkeeper sells the article at the list price, the profit of the shopkeeper = Rs x.
Therefore, The value of the article added by the shopkeeper = Rs x.
As the shopkeeper pays a VAT of Rs 2·70 and rate of sales tax = 2%,
Therefore, 2% of Rs x = Rs 2·70
2/100 × x = 2.70
x = 2.70 × 100/2
x = 135
Therefore, The amount of discount = Rs 135.
Therefore, Rate of discount =(135 × 550 ×100) = 24.5%
Example 7.
A manufacturer marks a machine at ` 4000. He sells this machine to a wholesaler at a discount of 20% on the marked price and the wholesaler sells it to a retailer at a discount of 10% on the marked price. If the retailer sells the machine without any discount and at each stage the sales tax is 6%, calculate the amount of VAT paid by: (i) the wholesaler (ii) the retailer.
Solution:
The marked price of the article by manufacturer = Rs 4000,
Discount is given by the manufacturer to a wholesaler = 20% of the marked price.
Therefore, Selling price of machine by manufacturer = (1- 20/100) × 4000
= (80/100) × 4000
= 3200
Discount given by the wholesaler to a retailer = 10% of marked price.
Therefore, Selling price of article by wholesaler = (1 – 10/100) × 5000
= (90/100) × 5000
= 4500
(i) Profit of the wholesaler = S.P. – C.P.
= Rs 4500 – Rs 3200 = Rs 1300.
Since sales tax on the machine at each stage is 6%,
Therefore, VAT paid by the wholesaler = 6% of Rs 1300 = 6/100 × 1300 = Rs 78
(ii) The cost price of the machine which the retailer paid to the wholesaler = Rs 3200.
As the retailer sells the machine at the marked price without any discount, the selling price
of the article by the retailer = Rs 4000.
Therefore, Profit of retailer = S.P. – C.P.
= Rs 4000 – Rs 3200 = Rs 800
Therefore, VAT paid by the retailer = 6% of Rs 800
= 6/100 × Rs 800 = Rs 48
Example 8.
A shopkeeper buys some electrical items whose printed price is Rs 3000 from a wholesaler at a discount of 10%. The rate of sales tax (under VAT) on the electrical items is 2%. If he sells the electrical items to a consumer at the printed price plus tax, find
(i) the price of the electrical items inclusive of sales tax at which the shopkeeper bought it.
(ii) the amount of sales tax (under VAT) paid by the shopkeeper.
(iii) the amount of tax (under VAT) received by the Government.
(iv) the amount which the customer pays for the electrical items.
Solution:
(i) Printed price = Rs 3000, rate of discount = 10%.
Amount of discount = (3000 × 10/100) = 300.
Therefore, The price of the electrical items which the shopkeeper paid to the wholesaler
= Rs 3000 – 300 = 2700.
Sales tax paid by the shopkeeper to the wholesaler
= 2% of Rs 2700 = (2/100 × 2700)
= 54
Therefore, the Price of the electrical items inclusive of sales tax at which the shopkeeper bought it = Rs 2700 + Rs 54 = Rs 2754
(ii) Since the shopkeeper sells the electrical items at the printed price of Rs 3000, the value added by the shopkeeper
= Rs 3000 – Rs 2754 = Rs 246.
Therefore The amount of sales tax (under VAT) paid by the shopkeeper
= 2
2% of Rs 246 = (246 × 2/100)
= Rs 4.92
(iii) The amount of sales tax (under VAT) received by the Government
= Rs 246 + Rs 4.92 = Rs 250.92
(iv) The value of the electrical items paid by the consumer = Rs 3000
Sales tax paid by the consumer = 4% of Rs 3000 = (3000 × 2/100)
= Rs 40
Therefore, The amount which the customer pays for the electrical items
= Rs 3000 + Rs 440 = Rs 3040
Example 9.
Swetha buys rice for $ 1000 and pays 2% tax. He sells the same rice for $ 12000 and charges 4% tax. Find the VAT paid by Swetha.
Solution:
Given that
Cost of the rice buy by a Swetha = 1000
Tax paid by swetha = 2% of $ 1000
= $ 2/100 × 1000
= $ 20
Selling price of the rice = $ 12000
Tax charged at 4% = 4% of 12000
= $ 4/100 × 12000
= $ 480
Therefore, VAT = tax recovered on sale – Tax paid on purchase of rice
= $ 480 – $ 20
= $ 460
Therefore, VAT = $ 460
Example 10.
Ms. Riya goes to a shop to buy goggles which cost Rs 230. The rate of the sales tax (under VAT) is 5%. She tells the shopkeeper to reduce the price to such an extent that she has to pay Rs 230, inclusive of VAT. Find the reduction needed at the price of the goggles.
Solution:
Let the reduced price of goggles be `x.
Sales tax (under VAT) on Rs x = (x + 5/100) = 105x/100
Therefore, Amount paid by Ms. Riya = (x + 105x/100)
= 205x/100
According to given
205x/100 = 230
205x = 230 × 100
x = 230 × 100/205
x = 112.1
Therefore, The reduced price of goggles = Rs 112.1
Therefore, The reduction needed in the price of goggles = Rs 230 – Rs 112.1 = Rs 117.9
Example 11.
The price of a car is Rs 620 inclusive of sales tax (under VAT) at the rate of 11% on its listed price. A buyer asks for a discount on the listed price so that after charging the VAT, the selling price becomes equal to the listed price. Find the amount of discount which the seller has to allow for the deal.
Solution:
Let the listed price of the bicycle be Rs P.
Sales tax (under VAT) = 11% of Rs P = 11/100 of Rs P = P/11
Therefore Selling price = P + P/11= 12P/11
According to given
12/11 P = 620
P = 568.3
Therefore, List price of the bicycle is Rs 568.3
Let the amount of discount be Rs x.
Therefore, The reduced price of the bicycle = Rs (568.3 – x).
Sales tax (under VAT) = 11% of Rs (568.3 – x) = Rs 568.3 – x /11
New selling price = Rs (568.3 – x) + Rs (568.3 – x/11)
= 12/11(568.3 – x)
According to given,
12/11 (568.3 – x) = 568.3
568.3 – x = 568.3 × 12/11
2381.8 – x = 619.9
x = 619.9
Therefore, The amount of discount = Rs 619.9