What does zero rating mean? Here are some of the key taxation terms that relate to the budgeting plans -- explained:
When a commodity is zero rated, the government doesn’t tax its sale. The manufacturers are allowed to claim credits for the value-added tax (VAT) paid on inputs.
If a good or business is “exempt,” the government doesn’t tax the sale of the good, but producers cannot claim a credit for the VAT they pay on inputs to produce it.
Exempting breaks the VAT’s chain of credits on input purchases hence raises prices and revenues.
Value-added Tax (VAT)