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As VAT is calculated on amount after Trade & Cash Discount whether customer avail the Cash Discount or not. Hence I have confusions regarding to two different scenarios, here it comes.
—Data—
List Price 250
Trade Discount 20%
Cash Discount 2.5%
VAT 17.5%—————-INVOICE—————
List Price————————-250
Trade Discount—————–(50)
————————————-___
————————————-200
*VAT——————————34.12
————————————-___
————————————234.12*—*VAT Calculation—
CD 200 x 2.5% = 5
Net Effect 200 – 5 = 195
VAT 195 x 17.5% = 34.12—–
Scenario 1;
If the customer does not avail the Cash Discount, would the VAT remain unchanged or we again calculate VAT on 200 (price after TD only) and alter the invoice.Scenario 2;
If the customer avail the Cash Discount, on which amount we will calculate CD, on 200 or on 234.32? (VAT is already calculated on price after TD & CD) and whats the VAT treatment in this scenario?Looking forward for your kind responses,
Regards,
Basically,regardless of whether the customer takes the cash discounts not the VAT is calculated as he it were taken.This remains the relevant amount regardless of whether the buyer makes a prompt payment or not.Hope this helps.
Thanks mrjonbain for your kind reply, But whats about the Scenario 2 where customer took the cash discount on which amount we will calculate CD on 200 or onn 234.32 (according to my example)?
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