Definition of tax

some need can be get by personally also some need should meet collective effort. collective need is fulfilled by
the state. For example, state managed police and hospital for this collective need purpose state charge tax. for
performing development work and regular work tax is
charged. Two things cannot be avoided one is death and second is tax
types of tax
1. tax
2. indirect tax
sources of government revenue
1. tax revenue
2. fine, income from government enterprises,
different charge levied, land
tax is a compulsory contribution from person to government to different expenses incurred in commission
interest of all without considering the corresponding benefit.
a fine is also compulsory contribution but it is charged only when people violet the government rule
base of tax charges................
 income
 property
 consumption
indirect tax imposed on different person and paid by different person. indirect tax is charged in goods and
services rather than income and profit. for example: custom duty, freight burden of indirect tax is shift. it is
initially paid by different by person and ultimately paid by different

In tax terminology person means:

Two person are there one is natural person and second is entity
1. Natural person created by god
2. Artificial person created by law exclude sole proprietor ship
Types of income
1. Income from employment
2. Income from business
3. Income from investment
4. Income from casual gain

Question no. 1:
An importer imported a certain product for rs. 100,000 and paid VAT on it. The importer sold it to the
wholesaler and the wholesaler sold to the retailer and who finally sold the product to the customer. All the
middle man charged 10 % profit on the cost price, what is the total price paid by the customer and the
amount of vat collected by the government at different stage of transaction?
Activities cost value added
 Vat Calculation schedule

Value Selling price VAT selling price with VAT collected by

Activities Cost added without VAT 13% VAT the government
Import by
1,00,000 13,000 13,000
importer
Importer to
100000 10000 110000 14300 124300 1,300
wholesaler
wholesaler to
110000 11000 121000 15730 136730 1430
retailer
retailer to
121000 12100 133100 17303 150403 1573
customer

Ans. Total price paid by customer including vat=150,403

VAT collected by government at each stage
a) At import = 13,000
b) At importer to wholesaler = 1,300
c) Wholesaler to retailer = 1,430
d) Retailer to customer= 1,573
 Question no. 2:
From the above question assuming that all the middle man charge
10% profit on selling price
A Manufacturing Company
VAT calculation schedule
VAT collected
Selling price Selling price with
Activities Cost Value added VAT by the
without VAT VAT
government
Import by
importer 1,00,000 13000 13000
Importer to
wholesaler 100000 11111.11 111111.1111 14444.44444 125555.5556 1444.444444
Wholesaler
to retailer 111111.1111 12345.67901 123456.7901 16049.38272 139506.1728 1604.938272
Retailer to
customer 123456.7901 13717.42112 137174.2112 17832.64746 155006.8587 1783.264746

Ans. Total price paid by customer including vat=154006.8587

VAT collected by government at each stage
a) At import = 13,000
b) At importer to wholesaler = 1444.4444
c) Wholesaler to retailer = 1604.9383
 d) Retailer to customer= 1783.2647

Formulae: 1.
when percentage profit on cost Is given
Profit = p*percentage profit/100
2. when % profit on sales is given,
Profit = profit* %profit/ 100- %profit
Question:
A customer purchases a motor by from the showroom paying a total price of rs. 226,000. The showroom had
purchased the bike from the dealer and the dealer had bought it from the importer, dealer and the showroom
made high 5% ,10%, and 15% profit on selling price respectively. Find out the cost price of the importer.

A Trading Company
VAT Calculation Schedule
Selling
price
Value without Selling price VAT collected by the
Activities Cost added VAT VAT with VAT government
Import by
importer 145350 18895.5 18895.5
Importer to
dealer 145350 7650 153000 19890 172890 994.5
Dealer to
showroom 153000 17000 170000 22100 192100 2210
Showroom to
customer 170000 30000 200000 26000 226000 3900
26000
 Ans. Total price paid by customer including vat=226000
VAT collected by government at each stage
 At import = 18895.6
 At importer to wholesaler = 994.5
 Wholesaler to retailer = 2210
 Retailer to customer= 3900

VAT = Amount including VAT*13%/113

Question no. 2: Solve the above question assuming that the percentage profit was charged on cost price.
A Trading Company
VAT Calculation Schedule
VAT
collected by
Selling price Selling price the
Activitie Cost Value added without VAT VAT with VAT government
Import by
importer 150574.0636 150574.0636 19574.62827 170148.6919 19574.62827
Importer to
dealer 150574.0636 7528.703181 158102.7668 20553.35968 178656.1265 978.7314135
Dealer to
showroom 158102.7668 15810.27668 173913.0435 22608.69565 196521.7391 2055.335968
Showroom to
customer 173913.0435 26086.95652 200000 26000 226000 3391.304348
26000

Ans. Total price paid by customer including VAT= 226000

VAT collected by the government at each stage
a. Import by importer = 19574.62827
b. Importer to dealer = 978.73141
c. Dealer to Showroom = 2055.3360
d. Showroom to customer= 3391.3043