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Hi sir,
In question 5.4 of BPP kit, it says that $20,000 of sales exempt from sales tax. It means that we don’t need to pay output tax and cannot reclaim input tax either. However in the answer we still calculate input tax using the total figure of purchase and I don’t quite understand why. Could you please help, thank you sir!!
It is only if the company is not registered for sales tax that they would not charge tax on sales and could not claim back the tax suffered.
The question does not say that the company is not registered – simply that for some reason $20,000 of the sales are exempt. The tax on all other sales and on purchases will be as usual.
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