PLEASE SORT OUT THIS....


the question of taxation of june pcc 09 IS as follows.

question no.7(A)

Compute the VAT amount payable by Mr. A who purchases goods from a manufacturer
on payment of Rs. 2,25,000 (including VAT) and earns 10% profit on sale to retailers.
VAT rate on purchase and sale is 12.5%

I HAVE CHECKED MANY SOLLUTIONS,,EVERYONE HAVE CALCULATED THE ANSWER BY TAKING 10% GP MARGIN ON COST,EVEN ICAI IN ITS SUGGESTED ANSWERS..

BUT ITS CLEARLY GIVEN 10%GP ON SALE TO RETAILER IN THE QUESTION..

SO WE SHOULD CALCULATE  SALE CONSIDERATION LIKE THIS-
200000(PURCHASE PRICE)+10% OF X=X
ASSUMING X AS SALE CONSIDERATION

OR LIKE THIS-
200000+10%OF 200000=220000??????

Replies (4)

Hi Kanveer..

 

Its only about the assumption, one will take...GP on sale price or GP on cost price...however, in the given question...it is like...'10% profit , on sale to retailers' and not '10% profit on sale, to retailers' ..

in sales always profit included and vat will also charged on profit portion.

HI SUNALI....

THNXXXX

BUT IF I ASSUME THAT THE GP IS ON SALE,AND GIVE MY ASSUMPTION IN THE NOTE AT THE END OF MY ANS.

WILL IT BE RIGHT OR WRONG?????

Originally posted by :Kanveer Singh Dhingra
" HI SUNALI....
THNXXXX
BUT IF I ASSUME THAT THE GP IS ON SALE,AND GIVE MY ASSUMPTION IN THE NOTE AT THE END OF MY ANS.
WILL IT BE RIGHT OR WRONG?????
"


 

I guess yes, it would be correct as generally profit is calculated in terms of sale price as well..but in the given case its better to go for C.P. else it will only make the calculation comparatively complex..

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