Multiple choice

100 shirts are purchased @ Rs. 250 per shirt. VAT charged is 4%. The shirts are sold @ Rs. 300 per shirt. VAT is charged 5%. Calculate the difference between input Vat and output VAT.

  1. Rs. 500

  2. Rs. 600

  3. Rs. 700

  4. Rs. 550
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A Correct answer
Explanation

It is Rs. 500. 100 shirts are purchased @ Rs. 250 per shirt. Hence, total purchase value is 100 X 250 = Rs. 25,000. VAT charged on it is 4%. Hence, input VAT is 4/100 X 25,000 = Rs. 1,000. 100 shirts are sold at Rs. 300 per shirt. Hence, total sales value is 100 X 300 = Rs. 30,000. VAT charged on it is 5%. Hence, output VAT is 5/100 X 30,000 = Rs. 1,500. Hence, difference in output and input VAT is Rs. 1,500 - Rs. 1,000 = Rs. 500.

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