Treatment of discount
This query is : Resolved
21 December 2010
hi, I want to know that whether vat charged on basis value or after deduction of discount e.g. Mr A ( Retailer) sell a product
situation A
basic Price 1000
Less Discount 20% 200
Balance 800
Vat @ 5 % on 800 40
Total Value 840
situation B
Basis price 1000
Less Discount 20% 200
Balance 800
Vat @ 5 % on 1000 50
Total Value 850
which situation is correct please suggest me this type of discount is cash discount or trade discount
situation A
basic Price 1000
Less Discount 20% 200
Balance 800
Vat @ 5 % on 800 40
Total Value 840
situation B
Basis price 1000
Less Discount 20% 200
Balance 800
Vat @ 5 % on 1000 50
Total Value 850
which situation is correct please suggest me this type of discount is cash discount or trade discount
21 December 2010
First one is correct.. VAT means Value Added Tax.. Value added in this question will be calculated based on 800/- as 200/- is already gone.
21 December 2010
But Sir , what type of discount this, cash or trade, can you write me the treatment of cash discount in relation to vat changeability
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