CAF-2 · Chapter 17 · Question 10 of 15
What is the primary difference between a "zero-rated supply" and an "exempt supply" under the Sales Tax Act, 1990?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) B) Input tax paid related to zero-rated supplies is refundable, whereas input tax paid related to exempt supplies is inadmissible and cannot be adjusted or refunded.
Explanation
For zero-rated supplies (like exports or Fifth Schedule items), the tax rate is 0%, but the supplier remains in the tax net and can claim a refund for the input tax paid on their purchases. For exempt supplies (Sixth Schedule items), the input tax paid is inadmissible, meaning it is neither adjustable nor refundable.
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