Mr. Vikas, a toy importer has understood the importance of manufacturing in India. He is backed up by the new govt. policies that motivate him to…

Mr. Vikas, a toy importer has understood the importance of manufacturing in India. He is backed up by the new govt. policies that motivate him to manufacture in India. As per the custom department any import made for the manufacturing under "Made in India", custom duty will be refunded upto 80%. Vikas decided not to import toy from China anymore, instead import raw material from Srilanka, for the manufacturing of toys in India. Under an agreement of Govt. Of India with Srilankan Govt., any import from Srilanka will receive tax benefits. Vikas ordered material Xendga & material Zenga from Srilanka. Details are given below:- Srilankan Rupees (SLR) Material Xendga (12,000 units * 125 SLR) 15,00,000 Material Zenga (8,000 units * 225 SLR) 18,00,000 Factory cost 33,00,000 Add: Containers cost 2,00,000 Add: Freight upto loading shipment on ship (paid by exporter) 50,000 F.O.B. 35,50,000 Ocean Freight is $ 2,000Insurance is $ 1,500 When shipment reached India, it was unloaded at Chennai port. Vikas requested to put the goods in custom port's warehouse. Vikas due to cash crunch was not in a position to pay custom duty and therefore did not file the bill of exchange (B.O.E.). Custom authorities charged a penalty of INR 15,000. Finally, after a month Vikas filled B.O.E. and paid custom duty of 20% on CIF value of the shipment. IGST was also applicable @ 18% on the combined value of CIF & custom duty paid. He spent further a sum of INR 12,500 to bring the imported goods to his factory. An inspection was done on the goods and it was found that 5% of the goods were broken. This came to management as a surprise because generally such rate of defects on imports is 8%. Additional Information: Exchange rates:1 SLR = 0.25 INR1 USD = 75 INRIGST credits are available.Containers were refunded at INR 38,000.Indian and Srilankan brokers were paid commission by Vikas on factory cost. Indian broker charged 6% whereas Srilankan broker charged 12%.CIF (cost, insurance and Freight) includes F.O.B (Free on Board)., Insurance & Ocean freight. You are required to answer the following 5 questions: