Practice question
A VAT-registered business has ordinary taxable sales and VAT-exempt sales. A particular input VAT amount is directly and exclusively attributable to the exempt sales. It claims the entire amount against taxable output merely because the business is VAT-registered. Assume no special rule changes the result. Which response is correct?
- Registration alone does not make exempt-sale inputs creditable against taxable output; attribution rules apply.
- Every input of every registered person is automatically creditable.
- Exempt sales always carry the same input-credit treatment as taxable sales.
- The business can choose attribution solely to maximize credits.
- The input becomes output VAT automatically.
Legal references
- NIRC Section 110(A)–(C), as amended; https://lawphil.net/statutes/repacts/ra1997/ra_8424_1997.html
- RA 11976 Sections 19 and 21, input VAT and invoicing; https://lawphil.net/statutes/repacts/ra2024/ra_11976_2024.html
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