Input sales tax
Input sales tax is tax charged on purchases. Where the business is registered and recovery is permitted, record recoverable input tax separately from the cost of inventory, assets or expenses and offset it against output tax under the tax system. Non-recoverable input tax forms part of the relevant cost. FA questions normally specify registration, rates and whether amounts include tax.
Worked example
A recoverable-tax purchase costs $1,000 plus 20% tax: debit purchases $1,000 and input tax $200, and credit payables or bank $1,200.
Common mistake
Do not divide a tax-inclusive amount by the tax rate: with 20% tax, $1,200 inclusive gives net $1,000 by dividing by 1.20.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | F1 | Direct | July 2027–August 2028 |
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | K1 | Direct | July 2027–August 2028 |
| CIMA | BA3 | Direct | Official assessment-window verification pending |
| FIA | FFA | Direct | September 2026–June 2027 |
Related terms
Also called: Input tax