A hair dryer has a price of ₹5400 including 8% VAT. The price before VAT is:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → ₹5000
VAT is charged on the price before VAT, so a price “including 8% VAT” is the price before VAT plus 8% of it, that is, 108% of the price before VAT.
108% of the price before VAT = ₹5400
Price before VAT \(\displaystyle=5400\times\frac{100}{108}=5000\), that is, ₹5000
Tip: Taking 8% off the given price (5400 − 432 = ₹4968) is a common slip: the 8% is reckoned on the price before VAT, not on ₹5400.