An article was brought by a distributor for Rs. 15,000 (excluding tax). He sold it to a trader for Rs. 20,000. The trader sold the article to a retailer for Rs. 22,000 (excluding tax). Find the VAT paid by the distributor and by the trader if the tax rate was 10 percent.

Hint: VAT of an object is the difference between the tax charged by the seller and the tax paid by the seller. Find the tax paid and charged by the distributor and the trader and find the VAT paid by them.

Complete step-by-step answer:
VAT paid by the seller is just the difference between the tax charged by the seller and the tax paid by him.
The distributor buys the article for Rs. 15,000.
The rate of the tax is 10 %. Hence, the tax paid by the distributor is 10 % of Rs. 15,000, that is, Rs. 1,500.
Tax paid by distributor = \[\dfrac{{10}}{{100}} \times 15,000\]
Tax paid by distributor = \[Rs.1,500...........(1)\]
The distributor sells the article for Rs. 20,000.
Hence, the tax charged by the distributor is 10 % of Rs. 20,000, that is, Rs. 2,000.
Tax charged by distributor = \[\dfrac{{10}}{{100}} \times 20,000\]
Tax charged by distributor = \[Rs.2,000...........(2)\]
VAT paid by the distributor is given by:
VAT paid by the distributor = Tax collected – Tax paid
From equations (1) and (2), we have:
VAT paid by the distributor = \[2,000 - 1,500\]
VAT paid by the distributor = \[Rs.500\]
Hence, the VAT paid by the distributor is Rs. 500.
The trader buys the article for Rs. 20,000.
The rate of the tax is 10 %. Hence, the tax paid by the trader is 10 % of Rs. 20,000, that is, Rs. 2,000.
Tax paid by trader = \[\dfrac{{10}}{{100}} \times 20,000\]
Tax paid by trader = \[Rs.2,000...........(3)\]
The trader sells the article for Rs. 22,000.
Hence, the tax charged by the trader is 10 % of Rs. 22,000, that is, Rs. 2,200.
Tax charged by trader = \[\dfrac{{10}}{{100}} \times 22,000\]
Tax charged by trader = \[Rs.2,200...........(4)\]
VAT paid by the trader is given by:
VAT paid by the trader = Tax collected – Tax paid
From equations (3) and (4), we have:
VAT paid by the trader = \[2,200 - 2,000\]
VAT paid by the trader = \[Rs.200\]
Hence, the VAT paid by the trader is Rs. 200.
Hence, the VAT paid by the distributor is Rs. 500 and the VAT paid by the trader is Rs.200.

Note: VAT does not depend on the initial and the final cost and selling price, it is a quantity that is calculated at every step when an article is bought and sold.