Which of the following best describes input VAT?

Input VAT is best described as the VAT that a business pays on its purchases. This tax amount is significant for businesses because it represents the value-added tax that businesses incur when acquiring goods or services necessary for their operations. The input VAT can be recovered by the business against their output VAT, which is the VAT charged on the sales they make to consumers.

Understanding input VAT is crucial for maintaining accurate financial records and for filing correct VAT returns. Businesses can offset the input VAT from their VAT liabilities, thus effectively reducing the tax they owe to the tax authorities. This mechanism helps ensure that businesses are taxed on their value addition rather than on the total turnover.

The other options do not define input VAT accurately. The first option refers to output VAT, which is concerned with sales. The third option discusses VAT that cannot be recovered, while the fourth option relates specifically to VAT implications on exported goods, which are typically zero-rated.