Example: Sales Tax and VAT(in detail) Video Lecture - Class 8

hello friends this video on comparing
quantities part 9 is brought to you by
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now we learn about another important
concept which plays an important role in
buying and selling of items and that is
sales tax
so this is basically a tax which is
charged by the government on the sale of
any item so in very simple words you can
understand that whenever you buy go to a
shop and you buy anything ok so whenever
there is a field of I think metals
happen whenever the shopkeeper is
getting something to you some amount of
money has to go to the government so
what happens if you if you have ever
noticed and you have to share it to your
local store not so if you look at your
restaurant then or your shopping bill or
maybe your bill may be the bill from the
petrol pump ornaments or Father's will
so when you look at these bills you will
see that it shows at the end it shows
the total cost or the total price and is
also fees taxes and then it shows some
additional amount so these taxes is
something which doesn't go to this
pocket of the shopkeeper instead it goes
to the government so what happens is
when you buy an item you not only take
its price but also attached which in
turn goes to the government so you pay
the price of the item plus the fact and
the shopkeeper change that back to the
government and now since this tax is
charged by the government of the stain
of an item it is known as change that
however these days a new type of taxes
fervently picture and that is going to
be back or value-added back now why is
that come into picture to bezel very
quickly and very simply discuss about a
problem which was observed with fields
back so let us have a look at the exact
problem which happened with filter now
for the Train of any item there are many
different stages which are involved for
example you have somebody who is
producing the raw material then you have
somebody who's actually
in fact in the I sent from the raw
material then you have the retailer
which is at who is nothing but your
shopkeeper
and then you have the consumer which is
nothing but the customer that is us so
these are broadly the four stages which
are involved in the sale of any item now
let us say that here we are talking
about a product maybe an album pipe so
that is the product so you are the
customer you go to a shop which sells
iron files and you buy an iron pipe but
the shopkeeper has got that iron pipe
from the manufacturer who have actually
manufactured the iron pipe and then
again you have some company which
actually produces the raw material that
is a phallic Idol from all the deposits
and you know kind of get the raw
material grading so what happens what
was earlier happening world then the
manufacturer buys iron from the raw
material producer it paves the type of
the iron plus the same stack right then
again when the retailer by is the iron
pipe from the manufacture it it pays the
cost of the iron pipe plus the field
step now if you look at the field tag of
the raw material so only for the raw
material that is iron the sales tax was
already paid in stage one that is called
the stage one this is stage two and
stage three transaction so the task for
the raw materials we've already paid on
stage one but in this case what was
happening was in stage two again you are
painting a cap of maybe whatever
percentage so let us assume that there
is a same type of 2% so at the first
stage you pay the sales tax of keepers
and again at the second stage you paid
at a practice two percent on the overall
price of the product so that means you
end up painting the paying some portion
of the tax of the raw material again at
stage two
now at stage 3 when the customer buys
the iron pipe from the retailer the
customer also pays the price of the of
of the five plus two percent acts on it
so that means basically at this stage
the customer fees
some type of the vomity some type of fat
for the raw material some type of s for
the manufacture of the raw material and
remaining part for whatever extra cost
the retailer had to incur so basically
when you look at all these three stages
separately you see that difficult tax
was being paid for the same product for
example if you have painted the tax for
the raw material in stage 1 you should
not take it again in stage 2 or stage 3
but that reputation was happening before
with the concept of sales back so now
what was the ideal scenario that should
have happened okay so in the ideal
scenario in stage 1 you should pay the
sales tax on the raw material perfect in
stage 2 you should pay sales tax only on
the manufacturing part and not under
domain yes similarly in stage 3 you
should pay tax only on the extra cost
that the detailer had incurred and not
on the manufacturing cost not or the raw
material right so that is how it should
happen and that is what started
happening with the concept of that that
is value-added tax
so this is a stack which is on the value
that is added at each step that is why
it is called value-added so it is that
the tax on the amount for by which the
value of an article has been increased
at each stage of its production or
distribution for example the raw
material cost was let's say 500 now
after getting manufactured its price and
increase the vitamin it and it has
become 700 selected this time the price
was 500 and in stage 2 the prices
increased 2 rupees 700 that means 500
was the cost of the raw material so this
time then you charge that you should not
charge it on 700 you should rather
tragic only on the difference that is
this to person should be charged only
one to be 200 because 200 is the extra
manufacturing cost that has been in gold
by
manufacturer now let's say by the time
it reaches to the retailer the cause has
become rupees 800
so basically 500 out of these words for
the raw material 7 an extra 200 words
for the manufacturing so the detailer
has incurred extra cost of rupees
hundred so the sales tax design should
be charged only on that extra cost or
the value which the retailer had added
to the project that is you keep hundred
so the tax should be charged on to this
hundred so this is the concept of
value-added tax
so you see here or the percentage plays
a major role because whenever you talk
about that there is certain person for
example gears just just a dummy number
and taken is 2 percent so you should be
very much clear with percentages because
percentages play so much important role
in different types of taxes so what do
we understand you it so we simply see
that repeated tax was on the same item
was avoided by the concept of back and
this holds true for all the products
that you see in the market for example
if you go to buy furniture in a showroom
so the showroom where you're going that
that is basically the detailer right now
the retailer is getting the furniture
from the manufacturers who are actually
making the furnitures and the
manufacturers they need raw materials to
make the furniture so they are getting
the goods and all the other door
materials from different dramedy
introduces we in this fashion you can
analyze it for worthless than out the
different teachers are involved in the
case of any item let's try this one
I purchased a hairdryer forty five
thousand four hundred including eight
persons back find the friend before bag
was added now whatever but why what has
been understood from the previous light
that that is the tax which is always
added on the selling price correct
because that are contain which discussed
symbol peace or the person who buys the
buyer has to be right so selling price
is that
which normally the buyer pays for
example if I go to a shop to buy a book
the price that I pay for the book that
is the sailing friend of the short
people right so in this case I gotta pay
the exact price plus back to basically
back gets added on the selling price the
little very important step back
all these get added on the scheduled
time now in this case let us assume that
the price before bad will you please X
because we do not know how much it was
to just assume that it will be same
now if you add 8 percent back on it that
means initial trial it was X with this
price you are going to add 8 percent
back so 8 percent back will get added on
what on the total trend before the back
so X plus 8 percent of X so this becomes
what this becomes the actual selling
price that is the price which the
customer pays to buy the product so in
this case the customer has paid to be
5,400 so X plus 8 percent of X is equal
to 5400 so we can solve this equation
this becomes 8 plus 8 508 is equal to
5,400 or we can say hundred X plus 8 8
divided by hundred is equal to 5,400 or
108 X is equal to 5,400 in 200 or H is
equal to 5,400 in two hundred divided by
108 so you can cancel these out so into
the count should speak so therefore this
is the answered entity inside thousand
so five thousand would be five thousand
with the price of the hair dryer before
that book
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