TAXABLE AND EXEMPT SUPPLIES
In terms of the Value Added Tax (VAT) Act [Chapter 23:12], VAT is levied on the supply of goods and services as well as on the importation and exportation of goods and/or services.
Taxable supplies attract VAT at a specified rate (which can be 15%, 5% or 0% or any other rate as may be specified by the Minister).
Standard rated supplies are supplies of goods and services that are taxable at the rate of 15%.
Most of the goods are standard rated unless they have a specified rate, are zero rated, or exempt.
With effect from 1 January 2010, some items which were formerly zero rated were added on to the list of standard rated products. This means that the supply of goods listed below is now chargeable at the rate of 15%:
• Butter, almonds, hazelnuts, walnuts, chestnuts, pistachios, macadamia nuts, margarine (excluding liquid margarine), groundnuts (peanut butter), lotions, rubber gloves, plastic gloves and raincoats.
Zero rated supplies are taxed at the rate of 0%. Zero rating is a way of ensuring that goods are provided free of VAT. A registered operator who supplies zero rated goods or services is allowed to claim input tax credit in relation to that supply. Such an operator must obtain and retain documentary proof of his entitlement to apply the zero rates.
Zero rated supplies are specified in the VAT Act and include:-
? Basic foodstuffs such as mealie-meal, sugar, milk, meat, salt, bread, etc.
? Agricultural inputs such as fertilizer, seeds, and pesticides, animal feed, animal remedy, plants, tractors, etc.
? Exported goods with the exception of un-beneficiated chrome which is taxed at 15%.
Exempt supplies are supplies of goods and services on which no VAT is chargeable at all.
VAT incurred on goods and services acquired to make exempt supplies shall not be claimed as input tax credit. Traders who exclusively provide exempt supplies are not required to register for VAT purposes. Exempt supplies include the following services and products:
• medical services
• educational services
• rentals from residential properties
• transport of fare-paying passengers
• water for domestic use
• electricity for domestic use
• fuel