What is the main purpose of allowing input tax credit in a value-added sales tax system?
Correct answer: C. To prevent repeated taxation of the same value
- A. To tax only the importing business
- B. To exempt every business from sales tax
- C. To prevent repeated taxation of the same value
- D. To convert sales tax into income tax
Explanation
Input tax credit allows tax paid on business purchases to be adjusted against tax charged on sales. This taxes the value added at each stage and helps prevent cascading of sales tax.
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About Taxation
Taxation covers the principles used to assess and collect taxes from individuals, businesses and transactions, with emphasis on income tax and sales tax concepts in Pakistan. Questions involve taxable income, exemptions, deductions, tax liability, withholding, returns, assessment, tax avoidance versus evasion, and the distinction between direct and indirect taxes.
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