A shopkeeper purchased a sack of rice in Rs. 6890 and he paid 4% tax on it. Now shopkeeper sold that sack of rice in Rs. 7900 and charges tax 6% on it. Find the value added tac on it?
Answer: Rs. 198.4
Explanation
To find the value-added tax (VAT), we need to calculate the tax paid on purchase and tax charged on sale, then find the difference.
Purchase price = Rs. 6890
Tax paid on purchase = 4% of 6890
= 0.04 × 6890
= Rs. 275.6
Sale price = Rs. 7900
Tax charged on sale = 6% of 7900
= 0.06 × 7900
= Rs. 474
Value-added tax (VAT) = Tax charged on sale - Tax paid on purchase
= 474 - 275.6
= Rs. 198.4
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