Which of the following is an example of zero-rated VAT?

The correct answer is the option related to public transport, as this service is often classified as zero-rated for Value Added Tax (VAT) purposes in many jurisdictions. Zero-rated VAT applies to certain goods and services that are not taxed at the standard VAT rate, meaning that businesses do not charge VAT on these sales, but they can still reclaim any input VAT they incurred in the process of providing those goods or services.

Public transport is essential for promoting accessibility and sustainability, and governments frequently implement zero-rating to support these objectives, making travel more affordable for the public. This classification helps to reduce costs for consumers using buses, trains, and other forms of public transport, promoting wider usage and thereby contributing to reduced traffic congestion and environmental impact.

In contrast, the other options such as health services, children's clothing, and luxury hotels can have varied VAT treatments depending on the specific laws of each country. For instance, while health services and children's clothing can also be zero-rated in some jurisdictions, luxury hotels typically charge VAT at a standard or reduced rate due to the nature of luxury accommodation and services. Therefore, it's essential to know that while multiple categories may be zero-rated in some contexts, public transport is commonly recognized as a clear example of zero-rated VAT.