Multiple choice

Suppose a shopkeeper buys inputs worth Rs. 50,000 and his sales are worth Rs. 1,00,000 in a month. The input tax rate is 8% and output tax rate is 20%. What is the value added tax here after set off of input tax credit?

  1. Rs. 16,000

  2. Rs. 26,000

  3. Rs. 6,000

  4. Rs. 1,00,000
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Input purchased = Rs. 50,000 Input tax paid = 8% of 50,000 = Rs. 4000 (Input tax credit available) Sales = Rs. 100,000 Output tax = 20% of 1,00,000 = Rs. 20,000 Value added tax = Output tax - Input tax credit available = 20,000 - 4000 = Rs. 16,000

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