VALUE ADDED TAX (VAT)
VAT is the tax that is usually added to the value of goods and services then passed on to the consumers who ends paying for it. The sellers or traders usually act as agents of the government to collect the VAT from buyers and then remit it to the government.
TYPES OF GOODS AND SERVICES FOR VAT PURPOSE
i) Vatable goods and services: these are goods and services which are charged VAT at the standard rate of 16%. (14% From 1/5/2020) except for fuel and oil which is 8%
ii) Zero-rated goods and services: these are goods and services which are charged VAT at the rate of 0%. Some of them include;
- All exports of goods and services.
- Supplies to export processing zone entities.
- Supplies to charitable institutions.
- First aid items.
iii)Exempt goods and services: these are not charged VAT at all.
Only a person who deals exclusively with exempt Supplies who is not required to register for VAT. Some of the goods and services exempted from VAT include;
- Education services
- Medical services
- Dental services
- Vertinary and nursing services
- Special welfare services offered by charitable organizations
- Sanitary and pest control services
- Brokerage services
- Social welfare services offered by the county authority
- Services rendered to a member by a trade profession
- Car park services offered by the county authority
- Burial services
- Unprocessed agricultural produce.
- Financial services
- Salaries and wages
Value of goods and services for VAT purpose
When determining output and input VAT the value of goods and services can either be;
Inclusive of VAT
This means the value given already has VAT. In this case:
Output/ input VAT=value inclusive of VAT*16/116.
Exclusive of VAT
This means the value given does not have VAT in it.
In this case:
Output/ input VAT= value exclusive of VAT*16/100.
NON- DEDUCTIBLE INPUT VAT
This is the VAT paid by the seller or trader when purchasing the goods or paying for the expenses of the business but which cannot be deducted against the output VAT.
- VAT on entertainment services.
- VAT on restaurant services.
- VAT on accommodation services.
- VAT on catering services.