Multiple choice

Mr. Thomas purchased dress materials costing around Rs. 92,650 including 9% sales tax. From these materials, he designed three types of dresses K, L and M. Excluding the tax, these dresses were sold at Rs. 20,000, Rs. 38,000 and Rs. 42,000. The sales tax rates on these dresses are 4%, 8% and 12% respectively.

What is the value added tax deposited by Mr. Thomas?

  1. Rs. 1,230

  2. Rs. 8,880

  3. Rs. 7,650

  4. Rs. 16,530

  5. Rs. 510
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A Correct answer
Explanation

Value added tax (VAT) = Sales tax received - Sales tax paid Sales tax received = 4% of 20,000 + 8% of 38,000 + 12% of 42,000 = Rs. 800 + Rs. 3040 + Rs. 5040 = Rs. 8880 Sales tax paid = 92,650 x 9/(100 + 9) = Rs. 7,650

VAT= Rs. 8880 - Rs. 7,650 = Rs. 1,230

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