Topic: Value-Added Tax (VAT), Customs, and Excise Duties

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  • 5 Marks

PT – Nov 2023 – L2 – Q2b – Value-Added Tax (VAT), Customs, and Excise Duties

State five circumstances under which the Commissioner-General shall cancel VAT registration.

State FIVE (5) circumstances under which the Commissioner-General shall cancel the VAT registration of a taxable person.

The Commissioner-General is mandated to cancel the registration of a taxable person under the following circumstances:

1. The taxable person no longer exists.
2. The taxable person is not carrying on a taxable activity.
3. The taxable person is not required or entitled to apply for registration.
4. The taxable person has no fixed place of business or abode.
5. The taxable person has not kept proper accounting records related to the business activity carried on by that person.
6. The taxable person has not submitted regular and reliable tax returns required under the VAT Act.
7. The taxable person has not met the registration threshold during the twelve-month period immediately before the application was made or will not meet the threshold during the twelve-month period following the date of the application.
8. A minimum period of two years has elapsed since the effective date of the registration (this provision does not apply to an auctioneer, the Government, or a promoter of a public entertainment).
Cancellation takes effect from the end of the tax period in which the registration is canceled or any other date determined by the Commissioner-General.

  • 5 Marks

PT – Nov 2023 – L2 – Q2c – Value-Added Tax (VAT), Customs, and Excise Duties

Determine whether a hostel facility and the supply of food and drinks are taxable.

State whether the following are taxable or not and briefly explain your answer.
i) Hostel facility offered to candidates by the Commonwealth Hall of the University of Ghana for profit.
ii) The supply of food and drinks by Papaye to the Vice President of Ghana for the celebration of his birthday.

i) Hostel facility offered to candidates by the Commonwealth Hall of the University of Ghana for profit
The provision of hostel facilities for profit is considered a taxable supply under the VAT Act, 2013 (Act 870). Commonwealth Hall offering hostel accommodation for profit is regarded as a commercial activity and therefore subject to VAT. It becomes exempt from VAT only if the purpose is not for profit, such as in cases of hosting candidates for educational purposes without a profit motive.

ii) Supply of food and drinks by Papaye to the Vice President of Ghana for the celebration of his birthday
The supply of food and drinks to the Vice President of Ghana for his birthday celebration is taxable. The Vice President, unlike the President of Ghana, does not have any specific exemptions or reliefs under VAT law. Therefore, this transaction is subject to VAT as it involves the supply of goods and services for consumption.

  • 5 Marks

PT – Nov 2023 – L2 – Q2a – Value-Added Tax (VAT), Customs, and Excise Duties

Define "Supply of Goods" and "Supply of Services" as per the VAT Act.

There is imposed by the Value Added Tax Act, 2013 (Act 870) a tax to be known as the value added tax, which is to be charged on:
(a) The supply of goods or services made in the country other than exempt goods or services; and
(b) The import of goods or services other than exempt import.

Required:
i) What constitutes “Supply of Goods”?
ii) What constitutes “Supply of Services”?

i) Supply of Goods
Under the VAT Act, the supply of goods is an arrangement in which the owner parts with possession of goods, such as through sale, barter, lease, transfer, exchange, gift, or a similar disposition. Supply of goods does not include the supply of money. Additionally, the disposal of a taxable activity or part of a taxable activity that can be operated as a going concern is considered a supply of goods. Other forms of power, heat, refrigeration, or ventilation are also treated as a supply of goods.

ii) Supply of Services
A supply of services refers to the performance of services for another, making available a facility, tolerating a situation, or refraining from doing something. Services that are incidental to the supply of goods are considered part of the goods supply, and likewise, goods that are incidental to a service supply are treated as part of the service.

  • 5 Marks

PT – May 2020 – L2 – Q2d – Value-Added Tax (VAT)

Discusses the conditions under which a small business can apply for VAT registration without meeting the threshold requirements.

Abah Enterprise is a small business but intends to bid for government contracts. It has a very small cash flow, with turnover unable to be registered under the compulsory registration arrangement for Value Added Tax. The proprietor of Abah Enterprise feels that if the enterprise is not registered for Value Added Tax, it will be difficult to be able to bid for government contracts.

Required:
Under what condition can Abah Enterprise apply to Ghana Revenue Authority for Value Added Tax Registration without meeting the threshold registration requirements under section 6 of the Value Added Tax Act 2013 (Act 870)?
(5 marks)

Abah Enterprise can apply for VAT registration without meeting the threshold if the following conditions are met:

Fixed Place of Abode or Business: The business must have a permanent and identifiable place of operation.

Reasonable Grounds for Belief: There should be reasonable grounds to believe that the business may soon meet the VAT registration threshold.

Proper Accounting Records: The business must maintain proper accounting records related to its operations.

Regular and Reliable Tax Returns: The business must submit regular and reliable tax returns as required by the Ghana Revenue Authority.

Fit and Proper Person: The proprietor must be deemed a fit and proper person to be registered for VAT.

(5 points @ 1 mark each = 5 marks)

  • 5 Marks

PT – March 2023 – L2 – Q2c – Value-Added Tax (VAT), Customs, and Excise Duties

Advise on deductibility rules of input VAT incurred before registration.

Atakora Manufacturing Ltd is a company at Winneba that manufactures roofing sheets. The company has recently registered for VAT and is not sure about the treatment of its input VAT paid prior to VAT registration. The company has sought your guidance on how to treat input taxes paid prior to registration.

Required:

Advise the company on the deductibility rules of input VAT incurred by a company prior to VAT registration.

According to Section 48(12) of the VAT Act 2013, Act 870 (as amended) and Regulation 48 of L.I.2243, a taxable person may recover the VAT on stock and capital goods purchased or imported prior to registration, provided that:

  1. Ownership and Possession:
    The goods are still in the ownership and possession of the taxable person at the time of registration.
  2. Stock:
    The purchase or import of the stock occurred not more than four months before the date of registration.
  3. Capital Goods:
    The purchase or import of capital goods occurred not more than six months before the date of registration.
  4. Tax Invoice:
    The taxable person is in possession of a valid tax invoice or relevant customs entries.
  5. Inventory:
    An inventory of all goods on hand must be produced on the effective date of registration.
  6. Claim Submission:
    Claims for recovery of VAT must be submitted in the prescribed form.
  • 4 Marks

PT – March 2023 – L2 – Q2b – Value-Added Tax (VAT), Customs, and Excise Duties

State the conditions under which voluntary VAT registration may be denied.

An application for a voluntary VAT registration may be denied the opportunity to register for VAT although the Value Added Tax Act, 2013 (Act 870) makes provision for voluntary VAT registration.

Required:

State the conditions under which an application for voluntary VAT registration may be denied.

The Commissioner-General may refuse to register a person for VAT on the following grounds:

  1. The person has no fixed place of abode or business (principal place of business is unknown).
  2. The person will not keep proper accounting records relating to any business activity carried on by that person.
  3. The person will not submit regular and reliable tax returns as required by or under the Act.
  4. The person is not a fit and proper person to be registered.
  • 6 Marks

PT – March 2023 – L2 – Q2a – Value-Added Tax (VAT), Customs, and Excise Duties

Explain the exceptions to the turnover rules under section 11 of the VAT Act.

Despite the turnover rules stated under section 6 of the Value Added Tax Act, 2013 (Act 870), there are certain exceptions to the turnover rules under section 11 of the same Act.

Required:

Explain the exceptions to the turnover rules under section 11 of the Value Added Tax Act 2013 (Act 870).

(i) A promoter of public entertainment,
(ii) An auctioneer, or
(iii) A national, regional, local, or other authority or body which carries on any taxable activity shall apply for registration.

Registration of these persons or entities occurs under the following conditions:

  • Promoter of Public Entertainment:
    Must apply for VAT registration at least 48 hours before the commencement of the public entertainment if, within any period of 12 or fewer months, the total value of taxable supplies is expected to exceed GHS 10,000.
  • Auctioneer:
    Must apply for VAT registration within 30 days after becoming an auctioneer.
  • National, Regional, or Local Authority or Body:
    Must apply for VAT registration within 30 days after commencing a taxable activity.
  • 7 Marks

PT – July 2023 – L2 – Q2c – Value-Added Tax (VAT), Customs, and Excise Duties

Breakdown of VAT and other taxes included in a phone bill using a given total amount.

Kingsly Atakora is a postpaid customer of MTN Ghana Ltd. He received his July 2022 billing from MTN Ghana Ltd amounting to GH¢3,121 inclusive of all taxes and levies. He is worried about the amount charged for his telephone usage for the month and wants to know the tax composition in the charge.

Required:
Compute the amounts of the following taxes included in the bill for July 2022:
i) VAT
ii) National Health Insurance Levy (NHIL)
iii) Ghana Education Trust Fund Levy (GETL)
iv) Covid-19 Levy
v) Communication Service Tax (CST)

Description Formula Amount (GH¢)
i) VAT GH¢3,121 × 1/9 346.78
ii) NHIL (GH¢3,121 – 346.78) × 2.5/111 62.48
iii) GETFUND Levy (GH¢3,121 – 346.78) × 2.5/111 62.48
iv) Covid-19 Levy (GH¢3,121 – 346.78) × 1/111 25.00
v) Communication Service Tax (CST) (GH¢3,121 – 346.78) × 1/111 124.96

Total VAT, Levies & CST: GH¢621.70

  • 3 Marks

PT – July 2023 – L2 – Q2b – Value-Added Tax (VAT), Customs, and Excise Duties

Explanation of three situations where a taxpayer cannot claim an input tax under VAT rules.

State THREE (3) situations under which a taxpayer cannot claim an input tax. (3 marks)

A taxpayer cannot claim input tax in the following situations:

  1. Exempt Supplies: Input tax cannot be claimed on goods or services that are classified as exempt supplies.
  2. Personal Use: Input tax cannot be claimed on goods or services used for personal, non-business purposes.
  3. Expired Claims: Input tax cannot be claimed if the claim is made after six months from the date of the tax invoice.
  • 5 Marks

PT – July 2023 – L2 – Q2a – Value-Added Tax (VAT), Customs, and Excise Duties

Explanation of five circumstances under which the Commissioner-General may cancel a VAT registration.

State FIVE (5) circumstances under which the Commissioner-General may cancel a VAT registration of a taxable person. (5 marks)

The Commissioner-General may cancel a VAT registration under the following circumstances:

  1. No Longer Exists: The taxable person no longer exists or has ceased operations.
  2. Not Carrying on Taxable Activity: The person is no longer carrying on a taxable activity.
  3. Below Registration Threshold: The taxable person’s turnover falls below the required VAT registration threshold.
  4. No Fixed Place of Business or Abode: The taxable person has no fixed place of business or abode in the country.
  5. Non-Compliance: The taxable person has not kept proper accounting records or failed to submit regular and reliable tax returns.

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