A manufacturer buys motorbikes at a cost price of Rs 30600.He sells it to B,B sells it to C and C sells it to D.The rate of VAT is 12.5% find_( 1) total amount of VAT paid and, (2) the cost price for the buyer if profit at each stage of selling chain is Rs. 1000.

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

 = 12.5*31600/100 = 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 = 12.5*1000/100 = 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 = 12.5 *1000/100 = 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 = 12.5*1000/100 = 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

12.5 *34600/100 = 4325

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

Regards

Arun (askIITians forum expert)