- Amendment of Section 17 of the VAT Act:
- A new paragraph (ea) in subsection (5) addresses situations where a supply was taxable at 16% before July 1, 2022, then reduced to 8%, and eventually became zero-rated or exempt. Businesses with excess VAT credits from these changes can apply for relief within six months of the provision’s commencement.
- Repeal of Input Tax Apportionment Threshold:
- Section 17(7) of the VAT Act is deleted, ensuring input VAT is claimed only to the extent it generates taxable supplies. Suppliers with more than 90% taxable supplies lose full input tax deduction, while those with less than 10% taxable supplies can now claim partial input tax.
- Delisting of Exempt Goods:
- Only two of the ten proposed deletions from the First Schedule were retained, making them subject to VAT at 16%. This aligns with the Government’s Medium-Term Revenue Strategy to reassess exemptions’ economic impact.
- Amendment of Existing Exemptions:
- VAT exemptions are extended to include the National Intelligence Service and Defence Forces Welfare Services. Exemptions for goods used in manufacturing essential hygiene products like diapers and sanitary towels are also expanded, potentially increasing production costs due to non-deductible input VAT.
- New VAT Exemptions:
- Introduces exemptions for denatured ethanol and certain raw materials for textile manufacturing, supporting local industries by reducing import costs. Additionally, a VAT exemption on the “transfer of a business as a going concern” is introduced, though guidelines are needed for clarity.
Source PwC
