Question 1: Sooria Inc. is a small firm that manufactures and services electrical appliances for the domestic market. Given below is its balance sheet along with the profit and loss statement at the end of the year. Figures are in thousand Rupees. BALANCE SHEET ASSETS LIABILITY Accounts receivable 15 Accounts payable 10 Inventories 20 Long-term Loans 140 Depreciable assets: Provision for (building, machinery deferred taxes 20 and equipment) a. New acquisitions 10 b. Depreciated value TOTAL LIABILITY 170 of existing assets 90 c. Land 35 Financial assets 100 EQUITY 90 Total assets 260 Total liability and equity 260 100 INCOME Sales of goods Sales of services Interest Income PROFIT AND LOSS STATEMENT EXPENDITURES Labor 50 Material 10 Utilities Rental charges Depreciation Interest Expense Profits before tax Corporate income tax Profit after tax 50 40 15 8 15 12 20 8 12 160 Total 160 Total *Amount purchased during the period under consideration. Also, utilities and rental charges are tax deductible. If a 25% value-added tax was introduced on goods and services--except interest, calculate for Sooriya Inc: (a) the gross taxes, the tax credits, and net taxes, if the VAT was administered using the credit method and it was: i. a consumption VAT ii. an income VAT, and iii. a gross product VAT (b) the taxes, if the VAT was administered using the addition method and it was: i. a consumption VAT, ii. an income VAT, and iii. a gross product VAT (e) the taxes, if the VAT was administered using the subtraction method and it was: i. a consumption VAT, ii. an income VAT, and iii. a gross product VAT Briefly explain the difference in the results. Which type of tax is closest in character to a general sales tax? If services were taxed at a different rate from sales of goods, which method of estimating VAT would best deal with this rate differentiation and why