PLZ CALCULATE VAT LIABILITY

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CA Kanveer Singh Dhingra

Merchant Banker

193 Points Joined November 2009

sir,,,
the question of taxation of june pcc 09 IS as follows.

question no.7(A)

Compute the VAT amount payable by Mr. A who purchases goods from a manufacturer
on payment of Rs. 2,25,000 (including VAT) and earns 10% profit on sale to retailers.
VAT rate on purchase and sale is 12.5%

I HAVE CHECKED MANY SOLLUTIONS,,EVERYONE HAVE CALCULATED THE ANSWER BY TAKING 10% GP MARGIN ON COST,EVEN ICAI IN ITS SUGGESTED ANSWERS..

BUT ITS CLEARLY GIVEN 10%GP ON SALE TO RETAILER IN THE QUESTION..

SO WE SHOULD CALCULATE SALE CONSIDERATION LIKE THIS-
200000(PURCHASE PRICE)+10% OF X=X
ASSUMING X AS SALE CONSIDERATION

OR LIKE THIS-
200000+10%OF 200000=220000??????

Replies (10)

AJAY AGARWAL

Articleship

102 Points Joined January 2009

profit will be 22222

Deeps

Article Assisstant

2485 Points Joined November 2008

this is as per suggessted given by the institute:

Computation of VAT payable by Mr. A:-
	Amount (Rs.)
Payment made to manufacturer	2,25,000.00
Less: VAT paid (2,25,000 x 12.5)/112.5	25,000.00
Purchase price	2,00,000.00
Add: Profit margin (10% of Cost Price)	20,000.00
Sale price before VAT	2,20,000.00
Add: VAT @ 12.5% on Rs. 2,20,000	27,500.00
Invoice value after 10% profit margin	2,47,500.00
VAT charged in invoice	27,500.00
Less: VAT input credit (2,25,000 x 12.5)/112.5	25,000.00
VAT payable by Mr. A	2,500.00