Ranjeet purchased a bicycle for ₹7,200. He had paid a VAT of 13.5%. The list price of the bicycle is
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → ₹6,343
The list price is the price before tax. VAT of 13.5% is charged on the list price, so the amount paid is the list price plus 13.5% of it, that is, 113.5% of the list price.
Amount paid: \(1.135\times\text{list price}=7200\)
List price: \(7200\div1.135\approx6343.6\), that is, about ₹6,343
Tip: To remove a tax already included in a price, divide by (1 + rate); subtracting 13.5% of ₹7,200 instead gives ₹6,228, which takes the tax on the wrong base.