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Please help solve this question

Gaurav Singh (student) (496 Points)

22 October 2011

Mr. Goenka, a trader selling raw materials to a manufacturer of finished products. He imports his stock in trade as well as purchases the same from the local markets. Following transaction took place during financial year 2009-10. Calculate the VAT and Invoice value charged by him to a manufacturer. Assume the rate of VAT @ 12.50%.

a. Cost of imported materials (from other state) excluding tax – Rs.1,00,000.

b. Cost of local materials including VAT-Rs.2,25,000.

c. Other expenditure includes storage, transport, interest and loading and unloading and profit earned by him-Rs.87,500.

I got the answer 25000 but the answer is given 23438 from where i picked the question.please share your answers.

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16 Replies

Girish K (Senior Accounts Executive) (218 Points)
Replied 22 October 2011

Hi Guarav,

I don't know the exact calculation.. But i can guess this will be the calculation how the answer you got;

Interstate - 1,00,000 X 12.5% (Assumed 12.5% VAT) = 12,500

Local - 2,00,000 (2,25,000 X 100/112.5) X 12.5% = 25,000

Total 37,500

Input VAT - ( 2,00,000 - 87,500 = 1,12,500 Purchases) 14,062

VAT Liability = 23,438

Pls let me know if its wrong.

Thanks

Girish

1 Like

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Jivanshu Singla (Articleship) (61 Points)
Replied 22 October 2011

Hi gauravi may be wrong but according to me the answer is Rs. 25000 as follow: Computation of tax payable:Output Vat 50,000Input Vat 25,000Vat payable = Rs. 25,000Computation of output Vat1. Imported goods(100000*112.5%) 1125002. Local purchase(225000*100/112.5) 2000003. profit 87500Sales 400000output vat payable = 400000*12.5% = 50000

AVTAR SINGH (Expert) (1873 Points)
Replied 22 October 2011

The output VAT is 12.5% of sales. The sales is cost of material + Expenses+ Profit = 300000 + 87500 = 387500

Output VAT is 12.5% of 387500 = 48438

VAT Liability = Output VAT - Input VAT = 48438 - 25000 = 23438

It may be noted that Input VAT can be claimed on Llocal Purchase only.

3 Like

MD. RAFI (Manager Accounts (future CA)) (670 Points)
Replied 22 October 2011

Sales (100000+200000+87500)= 387500 Out Put Vat @ 12.5% =48438 - Input Vat 25000 Vat Payable = 48438 - 25000 = 23438 Invoice Value Charged 387500 + 48438 = 435938

Gaurav Singh (student) (496 Points)
Replied 22 October 2011

See,Input tax will be 25000 as under

225000*12.5/112.5

And output tax will be 50000 as under

(200000+87500+100000+12500)*12.5%

Hence,net tax payable 50000-25000=25000.

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Shah Tarun (Student) (800 Points)
Replied 22 October 2011

Originally posted by : AVTAR SINGH
	The output VAT is 12.5% of sales. The sales is cost of material + Expenses+ Profit = 300000 + 87500 = 387500 Output VAT is 12.5% of 387500 = 48438 VAT Liability = Output VAT - Input VAT = 48438 - 25000 = 23438 It may be noted that Input VAT can be claimed on Llocal Purchase only.

I agree with this..

CA D. Singhal (CA ) (490 Points)
Replied 22 October 2011

@ Gaurav Pushkar: Why have you included Rs. 12,500 for calculation of output tax?

Gaurav Singh (student) (496 Points)
Replied 22 October 2011

12500 is tax on 100000.Since,its credit can't be taken, it is included in cost.

MD. RAFI (Manager Accounts (future CA)) (670 Points)
Replied 22 October 2011

Prevailing CST Rate is 2% for Inter State Purchase so you can add 2000/- to the cost of 100000/- not 12500/- @ 12.5%

1 Like

Gaurav Singh (student) (496 Points)
Replied 22 October 2011

Thanks,doubt cleared..........

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Ashish Ranpara (TAX CONSULTANT) (369 Points)
Replied 23 October 2011

The output VAT is 12.5% of sales. The sales is cost of material + Expenses+ Profit = 300000 + 87500 = 387500

Output VAT is 12.5% of 387500 = 48438

VAT Liability = Output VAT - Input VAT = 48438 - 25000 = 23438

It may be noted that Input VAT can be claimed on Llocal Purchase only

1 Like

CALTON DENNIS (Article Assistant) (147 Points)
Replied 23 October 2011

add 100000,200000& 87500 and calculate Vat 12.5% u will get 48437.5 as Vat Amount and deduct 12.5% on Local material i.e 25000 .. When u subtract (48438-25000) u will get 23438

1 Like

Gaurav Singh (student) (496 Points)
Replied 23 October 2011

yes bro..You are absolutely correct...

bhumika (ahmedabad) (27 Points)
Replied 23 October 2011

Hi, see vat on sale RS 25000(assumed sale 225000*100/112.5) cost(exclud tax) 112500(225000-25000-87500), so 112500*12.5%= 14062.5(local purchase)so vat o sale 25000 - vat on pur.(local)14062 =10938+12500(pur. from other state)= 23438. but please reply it's correct or not.