Which statement best describes a zero-rated supply for sales tax purposes?
Correct answer: B. Output tax is charged at zero, with input credit generally available
- A. Output tax is charged at the standard rate, with no input credit
- B. Output tax is charged at zero, with input credit generally available
- C. The supply is outside the scope of every tax law
- D. The supply is exempt, so related input tax is always refundable
Explanation
A zero-rated supply has a tax rate of zero, but the registered supplier can generally claim related input tax subject to the law. Zero-rating therefore differs from exemption, where input tax recovery is generally restricted.
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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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