Calculation of Invoice Value

5612 views 4 replies

CA Harit Kapoor

Chartered Accountant

71 Points Joined August 2008

Q) Compute the VAT amount payable by Mr. A who purchases goods from a

manufacturer on payment of Rs. 2,25,000 (including VAT) and earn 10% profit on

sale to retailers? VAT rate on purchase and sale is 12.5%

Ans) Calculation of invoice value

Purchased price of goods excluding VAT (225000 / 112.5 X 100) 200000

Add: Profit margin 20000

Amount of bill 220000

Add: VAT @ 12.5% 27500

Total invoice value 247500

VAT to be paid by Mr. A

VAT charged in the invoice 27500

Less: Input credit (12.5% of Rs. 200000) 25000

Net VAT payable 2500

i am confused as to if 10% PROFIT ON SALE TO RETAILERS is given...then why have we calculated the profit on cost???

why isnt the profit calculated as 10/110 * 200000

Replies (4)

Priyanka Arora

abc

55 Points Joined February 2010

hey i hve d same doubt...wait ill ask sum1...

satvik shah

Chartered Accountant

30 Points Joined May 2008

Purchase invoice		225000
Less : VAT credit		25000
Purchase cost to Mr. A	a	200,000
profit @ 10% (200000/90*10)	b	22,222
Retail invoice price before VAT	c=a+b	222,222
Vat payable	d	27,778
total retail invoice value	e=c+d	250,000

VAT payable on retail invoice	f	27,778
Vat credit available on pur	g	25,000
net Vat payable		2,778

Net outcome
As per ur calculation	(247500-2500-225000)	20000
As per calculation done as profit on sale price of retail invoice	(250000-2778-225000)	22,222

Divya Karthik

459 Points Joined February 2009

can u kindly explain Y u have take profit as (200000*90/10)? instead of (200000*10/100)?

SYED MOHD ZIYA

GST Consultant

32 Points Joined August 2011

Dear Sir

As you mention in question 200000/- is a puchase price (it is not a retailer cost if it is retailer cost then we calculate the profit 200000*10/110= 18181/- profit, so cost to mr.A 181819/- and now mr. A have to paid Vat included @ 12.5% on 181819/- = 181819*100/112.5=161616/- and vat is 20202/-

Puchase Value 161616/-

Add Vat @ 12.5% 20202/-

cost to MR. A 181818/- or 181819 round off

Add 10% profit 18181/-

Cost to Retailer 200000/-

If any confusion now so please clear with us.