Q.A wholesaler purchases goods for Rs 8,000 (excluding VAT) and pays VAT at 10% on this purchase. He sells the same goods to a retailer for Rs 10,000 (excluding VAT), charging VAT at the same rate. Find

Compute input tax on the purchase and output tax on the sale, then take the difference for the net amount payable.

Input tax = Rs 8,000 × 10% = Rs 800. Output tax = Rs 10,000 × 10% = Rs 1,000. Net VAT payable = Rs 1,000 − Rs 800 = Rs 200.

Input tax (VAT already paid on the purchase) = 8,000 × 10/100 = Rs 800.

Output tax (VAT collected on the sale) = 10,000 × 10/100 = Rs 1,000.

Net VAT payable = Output Tax − Input Tax = 1,000 − 800 = Rs 200.

Check by the value-added shortcut: value added = 10,000 − 8,000 = Rs 2,000; VAT on value added = 2,000 × 10/100 = Rs 200 — matches the output-minus-input figure exactly.

Alternative — the value-added method directly: Value Added = Sale Price − Purchase Price = 10,000 − 8,000 = Rs 2,000; Net VAT Payable = 2,000 × 10% = Rs 200, without separately naming an input-tax and output-tax step.

A frequent error is reporting the FULL output tax of Rs 1,000 as the amount payable to the government, forgetting that input tax credit reduces this to the net figure of Rs 200 — the wholesaler already handed over Rs 800 of tax to their own supplier (embedded in the purchase), so only the remaining Rs 200 is genuinely owed on the value the wholesaler personally added.