Which situation normally creates a tax liability for a business that sells taxable goods or services?
Correct answer: A. Its taxable output tax exceeds allowable input tax
- A. Its taxable output tax exceeds allowable input tax
- B. Its allowable input tax exceeds taxable output tax
- C. It has only exempt purchases and no sales
- D. It records a business loss regardless of sales tax figures
Explanation
Net sales tax is generally determined by comparing output tax with allowable input tax. When output tax is greater, the difference is payable, subject to statutory adjustments and restrictions.
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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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