Aco Ltd mined diamonds at a cost of FC 1,000,000 and sold them to Beako for FC 2,500,000.Beako distributed the diamonds to its customers and received FC 4,000,000.If the national VAT is 20%, how much tax did Beako pay?

Question

Quizplus · Accepted Answer

Beako would have charged its customers 20% VAT on FC 4,000,000, which is FC 800,000. However, Beako can claim the VAT it paid on its purchase from Aco Ltd, which is 20% of FC 2,500,000 (FC 500,000), as input tax credit. Therefore, the net VAT Beako pays is the difference: FC 800,000 (output tax) - FC 500,000 (input tax) = FC 300,000.

Aco Ltd Mined Diamonds at a Cost of FC 1,000,000