Which of the following categories of supplies allows businesses to reclaim VAT?

Zero-rated supplies are those that, while still subject to VAT, are taxed at a rate of 0%. This means that businesses can reclaim the VAT they have paid on related inputs when they make zero-rated sales. Common examples of zero-rated supplies include food, children's clothing, and certain exports. Since the VAT rate is zero, businesses are still allowed to recover VAT on purchases and expenses directly linked to making these supplies, as they are part of the broader VAT system.

In contrast, exempt supplies do not carry a VAT charge, and businesses cannot reclaim VAT on purchases associated with those supplies. Non-taxable supplies, such as certain financial services and insurance, similarly do not allow for VAT recovery. Capital supplies refer to assets that a business purchases for long-term use; while these may involve input VAT recovery depending on their nature and use, the classification primarily focuses on the type of supply rather than a general category of recoverable VAT under the indirect tax system. Therefore, zero-rated supplies are the distinctive category that allows businesses to reclaim VAT effectively.