Hello, I encountered a question today. It goes like this:
With respect to sales tax which of the following statements is correct?
A) Sales tax is charged on purchases and sales after trade discounts and before settlement discounts.
B) Exempt and zero rated supplies have the same tax effect.
C) Sales tax is charged on purchases and sales after trade discounts and after settlement discounts.
D) Sales tax is not reclaimable on capital expenditure.
Correct answer is C !
However, I couldn’t find an explanation for the answer. I’d appreciate it very much if you could give me an explanation.
C is stating what the actual tax rule is. The sales tax is always calculated on the invoice amount after subtracting all discounts.
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