Suppose I purchase raw material for Rs 100
I spend 20 Rs for its processing
I want to earn Rs 10 profit (called profit margin)
Hence,I will sell it for 100+20+10=130+VAT
Suppose Vat Rate is 20%,Vat will be charged on
Cost+Profit Margin
=20+10
=30
Vat=30*20%=6
Total Sales Price including Vat=130+6=136
Written on Aug. 24, 2016, 6:48 p.m.