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1. Value Added Tax Act 1998, Act 546 - Reformation 2. What is VAT? 3. What do you understand by Value Added Tax (VAT)?

1. VAT Act 546, 1998 reformation

VAT Act 546, 1998 Part 1 Section 1A(1) – 5(1)

1A. Imposition of sales tax -

1.     A tax to be known as sales tax is hereby imposed and shall in accordance with this Act be charged on –

(a)  Every supply of goods and services made in Ghana

(b)  Every importation  of goods; and

(c)   Supply of any imported service, other than  exempt  goods and services

2.     Unless otherwise provided in this Act sales tax shall be charged on the value of supply of goods and services where the supply is taxable supply and made by a taxable person in the course of his business operation.

3.     The sales tax shall be charged and payable on the importation of goods and for that purpose the laws and regulations applicable to collection of customs duties and other taxes on importation of goods shall apply with such modifications as are necessary. ?

4.     The charge made under this section shall be the output tax

2A. Persons liable to pay the sales tax –

Except otherwise provided in this Act, the sales tax shall be paid –

(a)  In the case of the taxable supply by the taxable person by the person receiving the supply

(b)  In the case of imported goods by the importer?

(c)   In the case of imported service by the receiver of the service?

3A. Rate of sales tax

Except otherwise provided in this Act, the rate of the sales tax shall be 10 per cent calculated on the value of the taxable supply of the goods, services

4A. Person receiving the supply –

A Person receiving the supply is a the consumer of the supply under this Act

1B. Imposition of value added tax-

1.     A tax to be known as value added tax is hereby imposed and shall in accordance with this Act be accounted for on –

(a)  Every supply of goods and services made in Ghana

(b)  Every importation of goods; and?

(c)   Supply of any imported service, other than exempt goods and services?

2.     Unless otherwise provided in this Act the value added tax shall be accounted for on value added on supply of goods and services where the supply is taxable supply and made by a taxable person in the course of his business operation.

3.     The value added tax shall be accounted for and be payable on the importation of goods and for that purpose the laws and regulations applicable to collection of customs duties and other taxes on importation of goods shall apply with such modifications as are necessary. ??

4.     The tax accounted for as the value added tax made under this section shall be a marginal tax

2B. Persons liable to pay the value added tax –

Except otherwise provided in this Act, the value added tax shall be paid –

(a)  In the case of the taxable supply by the taxable person making the supply

(b)  In the case of imported goods by the importer?

(c)   In the case of imported service by the receiver of the service?

3B. Rate of value added tax

Except otherwise provided in this Act, the rate of the tax shall be 0 per cent or 2 per cent or in the range [0, 3%] calculated or when calculated on the value of the taxable supply of the goods, services (or import?)

4B. Taxable person –

1)     A taxable person is a person registered under section 5 of this Act

2)     The Commissioner shall notify a taxable person when registered and shall issue a certificate of registration which shall be exhibited at the principal place of business operation of the taxable person

3)     The effective date of registration as a taxable person shall be such date as shall be specified in the certificate of registration issued by the Commissioner

 

5. Registration of a taxable person

1)     A person is registrable as taxable person if he is a person who makes a taxble supply of goods or services and in the case of a retailer of goods he is a person whose business turnover exceeds –

(a)     ’200 million over a twelve month period; or

(b)    ’150 million over a nine month period; or

(c)     ’100 million over a six month period; or

(d)    ’50 million over a three month period whichever is achieved earliest

2)     For the purpose of determining the thresholds under subsection (1), separate businesses under the same ownership may be treated as owned  by the one person.

3)     Any person who qualifies as a taxable person, or has grounds to be believe …

4)     A person  who is not registered but who is liuable to to be registered under this Act, ius a taxable person from the beginning of the tax period immediately following the period iun which the duty to apply for registration arose

 

22. Taxable value for determining the tax (VAT) on imported goods –

             The value for determining the value added tax chargeable on taxable import value calculated in accordance with sections 29 to 35 of the Customs, Excise and Preventive Service (Management) law, 1993 (P.N.D.C.L. 330) with the addition o all import duties and taxes but excluding the tax (VAT). ??

 

 

2. What is VAT?

Value Added Tax (VAT) is a form of consumption tax. From the perspective of the consumer, it is a marginal tax on the tax exclusive sale price being part of the sales tax paid. From that of the operator, it is a tax only on the "value added" to a product, material or service, from an accounting view, by his stage of its manufacture or distribution. The operator remits to the government the tax on the “value added” which is called the ‘Value Added Tax (VAT)’ and retains the difference between these two amounts.

The "value added" to a product by a business operator is the tax exclusive sale price chargeable to the consumer, minus the tax exclusive cost price of materials and other inputs. A VAT is like a sales tax in that ultimately only the operator is taxed. It differs from the sales tax in that, with the latter, the tax is collected and remitted to the government only once, at the point of purchase by the consumer. With the VAT, the tax is collected and remitted to the government each time there is “value added” in the supply chain and not on the tax exclusive sale price.

In other words,

Consumption output minus Consumption input = Value Added

Consumption output tax minus Consumption input tax = Value Added Tax

This is how Value Added Tax is a Consumption Tax.

It is arguable that since the consumer pays the Consumption output tax to the operator who takes out Consumption input tax and pays the balance as Value Added Tax, it is not strictly right to call or refer to what (Consumption Output tax) the consumer pays Value Added Tax.

Logically and practically, Consumption Output must always be bigger than the “value added” before you could have any value added. In other words, there must be some Consumption Input before you could have value added or “value added”.

Consumption Output Tax is wrongly written or referred to as Value Added Tax. Practically, it is unfortunate the wrong notion evolved with the VAT concept and finds expression in the statutes up to today.

It is time it is accepted that in this 201103 the Consumption Output Tax rate is the Standard rate 15% and it is wrong to say VAT/NHIL rate is the Standard rate 15%.

And, once we have for the VFRS the VAT/NHIL rate as Flat rate 3% it is right to say that the VAT/NHIL rate for the non-VFRS is the VAT rate [0, 3%].

It could be necessary to take a small lesson in order to flow in the rendition of Value Added Tax in Set Notation. Read “About the notation [0, 15%]”

 

About the notation “[0, 15%]”

The crux of the VAT matter hinges on capability to understand, presenting and representing VAT rate as a number belonging to a given set of Real numbers, say

[0, 15%] and associated sets.

We will treat here, the symbols and notation of VAT rate: [a, b].

If you have the slightest difficulty with any symbol or notation used, the following are some explanatory notes.

 

Useful notes on Sets

 

[a, b] = {x ε R | a ≤ x ≤ b} is a closed set

[a, b) = {x ε R | a ≤ x < b} is a set closed on the left and open on the    right

(a, b] = {x ε R | a < x ≤ b} is a set closed on the right and open on the        left

(a, b) = {x ε R | a < x < b} is an open set

 

Domain, range, interval are interchangeably used to denote Set

 

List of symbols

 

A       Any letter say “A” is used to denote a set (a collection of objects)

{       Parenthesis representing left side of a set

}       Parenthesis representing right side of a set

x       like any symbol or alphabet used as a sign to represent an object

ε       belongs to; is a member of

R       Set of Real numbers

|        such that

a       a number

b       a number

       less than or equal to

=       equal to

[        Square bracket representing left side of a set that is a range (collection of numbers)

]        Square bracket representing right side of a set that is a range (collection of numbers in sequence)

(        Bracket representing left side of an open set

)        Bracket representing right side of an open set

<       less than

The notation [a, b]

 [a, b] = {x ε R | a ≤ x ≤ b} is the representation of a closed range of “a” and “b” that is equal to the set of all real numbers having a number “x” such that “x” is more than or equal to “a’ and is less than or equal to “b”. (Any number equal to or between the two values of “a” and “b” is a member of or a number in [a, b].)

The notations [0, 15%]; [0, 3%]; [12%, 15%]

·               [0, 15%] = {x ε R | 0 ≤ x ≤ 15%}, is the set of all real numbers having a number “x” such that “x” is more than or equal to “0’ and is less than or equal to “15%”.

·               [0, 3%] = {x ε R | 0 ≤ x ≤ 3%}, is the set of all real numbers having a number “x” such that “x” is more than or equal to “0’ and is less than or equal to “3%”.

·               [12%, 15%] = {x ε R | 12% ≤ x ≤ 15%}; is the set of all real numbers having a number “x” such that “x” is more than or equal to “12%’ and is less than or equal to “15%”.

 

 

3. What do you understand by Value Added Tax (VAT)?

A.    Principal Enactment VAT Law 1998, Act 546

1.     The operator charges Value Added Tax (Sales Tax) on each supply the consumer @ 15%

2.     The operator pays Value Added Tax on each supply to VAT Service @ [0, 15%] with input VAT invoices

 

B.    Principal Enactment VAT Law 1998, Act 546 with Value Added Tax (Amendment) Act, 2007 (Act 734); Value Added Tax (Amendment) Act, 2010 (Act 810)

1.     The operator charges Value Added Tax (Sales Tax) on each supply the consumer @

i.       15% if non-VFRS operator

ii.     3% if VFRS operator

iii.   15% if a daring VFRS operator

2.     The operator pays Value Added Tax on each supply to VAT Service@

i.       [0, 15%] if non-VFRS operator with input VAT invoices

ii.     3% if VFRS operator with or without input VAT invoices

iii.   [0, 15%] if VFRS operator with or without input VAT invoices and the daring VFRS operator

Threshold

ST Rate

VAT Rate

Operator

[10000, 90000]

3%, 15%

3%

Flat

(90000, ∞)

15%

[0, 15%]

non-flat

 

C.    Ahu VAT Model Proposed

1)    The operator charges Sales Tax on each supply as the consumer @ 15%

2)    The operator pays Value Added Tax on each supply to VAT Service@

(a)  3% if VFRS operator with or without input VAT invoices

(b)  [0, 3%] if non-VFRS operator with or without input VAT invoices   

D.    Comparative Sales Tax enactment (Previous and Current elsewhere)

1.     The operator charges Sales Tax on each supply the consumer @ 15%

2.     The operator pays Sales Tax on each supply to Tax Service @ 15%

 

 
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