Question

A motorcycle cost Rs30600 to Hero Honda company. The company sells it to a dealer P, P sells it to a dealer Q and Q sells it to a customer. If the profit at each stage of selling chain is Rs 1000 and the rate of VAT is 12.5%,find : (1) the total amount of VAT paid. (2) the amount which the consumer pays for motorcycle.

Answer 1

1. Selling price of motorbike to the manufacture = Rs 30600 + Rs 1,000 = Rs 31600

Amount of tax collected by manufacture A 

= 12.5% of Rs 31600.

Rs 12.5/100*31600
=Rs 3950

Dealer B earns a profit of Rs 1000, so the value added by dealer B is Rs 1000.

Amount of VAT to be paid by B = 12.5% of Rs 1000
Rs12.5/100*1000
Rs 125
Dealer C earns a profit of Rs 1000, so the value added by dealer C is Rs 1000.

Amount of VAT to be paid by C = 12.5% of Rs 1000
=Rs 125

D earns a profit of Rs 1000, so the value added by D is Rs 1000.

Amount of VAT to be paid by D = 12.5% of Rs 1000
=Rs 125

Total amount of VAT paid = Rs 3950 + Rs 125 + Rs 125 + Rs 125 = Rs 4325


2. Value of motorbike paid by the consumer

= Rs 31600 + Rs 1000 + Rs 1000 + Rs 1000

= Rs 34600

Tax paid by the consumer 

= 12.5% of Rs 34,600

Rs 12.5/100*34600
=Rs 4325

Amount paid by the consumer = Rs 34600 + Rs 4325 = Rs 38925