Question

a manufacturer buys raw material for 40000 and pays sale tax at rate 4% he sells ready stock for 78000 and charges sales tax of 7.5% find VAT paid by manufacturer

Answer 1

The sales tax paid by the manufacturer = 4% of Rs 40000 =(4/100) × 40000 = Rs 1600
Tax recovered on the sale = 7.5% of Rs 78000 = (7.5/100) × 78000 = Rs 5850
So, VAT = Tax recovered on sale − Tax paid on purchase = 5850 − 1600 = Rs 4250.