What does output tax refer to?

Output tax refers to the value-added tax (VAT) that a business adds to the sale price of goods or services it sells to customers. Essentially, when a company sells a product or service, it is required to charge VAT on that transaction, which is collected from the customer on behalf of the government. This VAT charged on sales is what constitutes output tax.

Businesses then report their output tax when calculating their VAT obligations, which is important for determining how much they owe to the government or how much they can reclaim if they have paid more input tax on their purchases. Understanding output tax is crucial for businesses to ensure compliance with tax regulations and for proper accounting practices.