At what rate are reduced rate supplies taxed?

Reduced rate supplies are typically taxed at a specific lower rate compared to standard supplies, which often have a higher tax rate. In many tax systems, the reduced rate is set at 5%. This is intended to make essential goods and services more affordable and accessible to consumers. The aim of implementing a reduced rate is often to incentivize purchases in particular sectors, such as food, children's clothing, or certain energy-saving materials.

Understanding the distinction between the standard rate and the reduced rate is crucial for compliance with tax regulations and for correctly calculating VAT (Value Added Tax) on sales. It is also vital for businesses to apply the correct tax rate to ensure they fulfill their tax obligations while providing accurate pricing to their customers. The focus on a reduced rate serves to balance revenue needs with consumer welfare.