VAT is a tax charged on goods and services. The rate of VAT is usually given in percentages and it is added to the basic cost. If the VAT rate is x%, then the VAT is given by:
VAT=x/100 ✖️ Basic cost
Or
VAT = x/(100+x) ✖️VAT inclusive cost
NOTE: The basic cost(i.e. VAT exclusive cost) is equivalent to 100% and VAT inclusive cost is equivalent to (100+x).The basic cost is the cost of the item without VAT.
LETS SOLVE THE EXAMPLE BELOW
VAT rate of a country is 12½%. A bill of ¢97,000.00 VAT inclusive was given to a woman after eating at a restaurant. Calculate the VAT component of the bill.
SOLUTION
VAT = x __ ✖️ VAT inclusive
(100+x)
VAT= 12.5 ✖️ 97,000
(112.5)VAT= 12.5 ✖️ 97,000
VAT=8,555.5555555547
Click on the link below to watch a video tutorial on how to solve VAT questions....
https://youtu.be/IONzc-dTvd8
END OF LESSON EXERCISE
The VAT rate of country is 12½%.A mam bought an item at ¢300, 000.00 VAT inclusive. Calculate i. The basic cost
ii. The VAT paid by the man
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