Question

Which of the following statements related to fully taxable and zero-rated supplies in a participating province is correct? Question 1 options:

a. Fully taxable supplies are taxed at the HST rate and zero-rated supplies are taxed at 0.0 percent. Input tax credits are available on only expenditures related to fully taxable supplies
b. Fully taxable supplies are taxed at the HST rate and zero-rated supplies are taxed at 0.0 percent. Expenditures related to both types of supplies are eligible for input tax credits
c. Both types of supplies are taxed at the HST rate. Input tax credits are available on only expenditures related to fully taxable supplies
d. Fully taxable supplies are taxed at the HST rate and zero-rated supplies are taxed at 0.0 percent. Input tax credits are available on all expenditures related to fully taxable supplies and on only capital expenditures related to zero-related supplies

Answer 1

The correct statement is that fully taxable supplies are taxed at the HST rate, zero-rated supplies are taxed at 0%, and businesses can claim input tax credits for both types of supplies.

Step-by-step explanation:

The correct statement related to fully taxable and zero-rated supplies in a participating province is: Fully taxable supplies are taxed at the HST rate and zero-rated supplies are taxed at 0.0 percent. Expenditures related to both types of supplies are eligible for input tax credits. This means that when a business makes fully taxable supplies, they must charge and remit the Harmonized Sales Tax (HST) to the government. However, for zero-rated supplies, even though the HST rate applied is 0%, the business can still claim input tax credits for the GST/HST paid on the purchases and expenses related to making those zero-rated supplies.