Atif supplied goods to his son’s newly established business at a heavily discounted price of Rs. 2,500,000. The discount allowed was 18%, whereas Atif's normal business practice is to allow an 8% discount. For the purpose of sales tax, what is the correct value of supply?

Correct answer: B) B) Rs. 2,804,878 (The price calculated at the normal 8% discount).

Explanation

In the case of trade discounts, sales tax is levied on the discounted price only if the discount allowed is in conformity with normal business practices. Since the transaction is with an associate, the open market price (computed by allowing the normal 8% discount instead of 18%) must be used.