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

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  • 5 Marks

PT – May 2021 – L2 – Q2c – Value-Added Tax (VAT), Customs, and Excise Duties

Explain the VAT implications on the sale of assets by a receiver.

A receiver of XX Bank intends to sell assets of the bank. The receiver wants your guidance on the VAT implications on the sale of the bank’s assets.

Required:
What is the VAT implication on the sale of the bank’s assets?

Under Section 25 of the VAT Act 870, if a taxable person supplies goods or services and input tax was denied on the acquisition, the supply is considered non-taxable. If input tax was allowed, VAT should be charged. In the absence of any information to the contrary, VAT must be charged on the sale of assets by the receiver if input tax was allowed on those assets. If input tax was denied, VAT should not be charged.

  • 6 Marks

PT – May 2021 – L2 – Q2b – Value-Added Tax (VAT), Customs, and Excise Duties

Discuss the VAT arrangement between Kuundive Ltd and Yelawana Ltd regarding the distribution and commission.

Kuundive Ltd produces fruits that have caught the interest of children. Kuundive Ltd engages Yelawana Ltd to mainly distribute its product and, in turn, receives a commission. Per the arrangement, Yelawana will put a margin on the price for the distribution.

Required:
What is the VAT arrangement between Kuundive Ltd and Yelawana?

Under Section 32 of the VAT Act 870 (2013), a supply of goods or services made by an agent for a principal is considered a supply by the principal. Yelawana Ltd, acting as an agent for Kuundive Ltd, adds a margin on the price for the distribution, but VAT is charged by the principal (Kuundive Ltd), not the agent. Yelawana Ltd earns a commission and invoices VAT inclusive to Kuundive Ltd. The agent will charge VAT to the consumer on behalf of Kuundive Ltd. There is no VAT between Kuundive Ltd and Yelawana Ltd.

  • 4 Marks

PT – May 2021 – L2 – Q2a – Value-Added Tax (VAT), Customs, and Excise Duties

Explain how VAT will be accounted for in the case of imported services in Ghana.

MMX Bank, a resident financial institution in Ghana, contracted Crown UK, a specialist in software maintenance. Per the contract, Crown UK is required to come to Ghana to provide the services every two years. The specialist will provide services to the bank’s clients in the normal banking operation.

Required:
How will VAT, if any, be accounted for?

VAT is charged on consumption. Since the services will be provided in Ghana, VAT will be charged. This is a case of imported services. According to Section 65 of the VAT Act 870 (2013) as amended, if the services are going to be used in a taxable activity, no VAT will be charged. If used for exempt activities, VAT will be charged. This situation relates to a reverse charge, meaning the recipient (MMX Bank) accounts for VAT, not Crown UK.

  • 6 Marks

PT – Aug 2022 – L2 – Q2b – Value-Added Tax (VAT), Customs, and Excise Duties

List three conditions under which a taxable person can deduct input tax without an invoice.

Where a taxable person does not have a tax invoice that provides evidence of the input tax paid, the Commissioner-General may allow a deductible input tax in the tax period in which the deduction arises to a taxable person under certain conditions.
Required:
State THREE (3) conditions that must be satisfied before a taxable person without a tax invoice may be allowed an input tax deduction. (6 marks)

  1. The taxable person took all reasonable steps to acquire a tax invoice.
  2. The failure to acquire a tax invoice was not the fault of the taxable person.
  3. The amount of deductible input tax claimed by the taxable person is correct or verifiable​
  • 9 Marks

PT – Aug 2022 – L2 – Q2a – Value-Added Tax (VAT), Customs, and Excise Duties

Advise Ekumfi Fruit Processing on the conditions required for a VAT refund under the Value Added Tax Act, 2013.

You are a student of taxation at Ebeyeyie Tax Education Institute. You have been contacted for tax advice by Ekumfi Fruit Processing Ghana Ltd. The company produces various kinds of fruit juices for both local and foreign markets. The Finance Director recently learned that the company can apply for VAT refund from the Ghana Revenue Authority (GRA) and has approached you for advice.
Required:
Advise the company on SIX (6) conditions that must be satisfied before the GRA may refund the excess VAT Input Tax to the company under the Value Added Tax Act, 2013 (Act 870), as amended. (9 marks)

The company must meet the following six conditions before applying for a VAT refund:

  1. The VAT paid qualifies as a deductible input VAT.
  2. The company must provide all necessary records to support the refund application.
  3. It must have submitted returns for all months it has been in operation.
  4. The company’s exports must exceed 25% of total supplies within the tax period.
  5. The total export proceeds must be repatriated to an authorized bank account in Ghana.
  6. The refund application can only be made when the excess VAT has been outstanding for at least three months​
  • 5 Marks

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

Explanation of activities that do not constitute supply of goods or services under the VAT Act 2013.

Section (33) of the Value Added Tax Act, 2013 (Act 870) states that; “Except as otherwise provided in this Act or Regulations, a taxable supply is a supply of goods or services made by a taxable person for consideration, other than an exempt supply, in the course of, or as part of taxable activity carried on by that taxable person”.

Required:
State THREE (3) activities that do not constitute supply of goods or services under the Value Added Tax Act, 2013 (Act 870). (5 marks)

The following activities do not constitute supply of goods or services under the Value Added Tax Act, 2013 (Act 870):

  1. The supply of money does not constitute the supply of goods.
  2. The transfer of goods to a person acting in a representative capacity for the transferor is not considered a supply of goods.
  3. The supply of services by an employee to an employer by reason of the employment is not considered a supply of services for VAT purposes.
  • 10 Marks

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

Conditions VAT-registered manufacturing companies must meet for VAT relief on imported raw materials.

According to section (38) of the Value Added Tax Act, 2013 (Act 870), the Minister may by legislative instrument make regulations to grant relief from tax on taxable imports of goods or taxable supplies of goods acquired in the country to the persons specified in the Third Schedule.

Required:
State FOUR (4) conditions that must be satisfied by VAT-registered manufacturing companies before they are granted upfront relief of VAT and levies on imported raw materials. (10 marks)

The conditions that VAT-registered manufacturing companies must meet to be granted upfront VAT relief on imported raw materials include:

  1. The manufacturer must be a member in good standing of the Association of Ghana Industries (AGI).
  2. The manufacturer must have submitted all previous tax returns and paid all outstanding taxes, penalties, and interest.
  3. The Commissioner-General must be satisfied with the manufacturer’s compliance and must list the manufacturer in a register published with a validity of 12 months.
  4. The raw materials imported must be applied solely and exclusively for the manufacturing operations of the company.
  5. The manufacturer must maintain an input-output ratio of at least 20%, except when imports exceed GH¢100,000 in a year.
  6. The manufacturer must belong to one of the following categories: Textiles, Food & Drug, Toiletries, Energy, Leather, Rubber & Plastics, Building Materials, Chemicals, Wood Processing, or Electrical & Electronics.
  • 5 Marks

PT – Aug 2022 – L2 – Q1a – Value-Added Tax (VAT), Customs, and Excise Duties

Explain the "Benchmark Value Discount" policy in Customs Administration and how its withdrawal benefits local rice producers.

The Finance Minister of Ghana during the 2022 budget presentation in Parliament announced the withdrawal of the “Benchmark Value Discount” policy on some imports. The President of the Professional Local Rice Growers Association (PLRGA) is elated about the announcement and has invited you, as a student studying taxation, to explain the concept of the Benchmark Value Discount policy to him.

Required:
Explain what the “Benchmark Value Discount” policy in Custom Administration is and how its withdrawal will be of much benefit to the President of the PLRGA.

The “Benchmark Value Discount” Policy was introduced in April 2019 by the government to make the Ghanaian ports competitive, reduce smuggling, and increase government’s revenue from the port. Under this policy, certain commodities are benchmarked to the prevailing world prices as a risk management tool, reflecting the true market dynamics of these commodities. It also takes into consideration factors such as the protection of health, the environment, and security, as well as the protection of local industries. The policy provided a discount of 50% on the delivery or benchmark values of imports, except for vehicles, for which the delivery values were reduced by 30%.

The government, however, suspended moves to remove the discount policy to allow for extensive stakeholder engagement on its viability and impact on both government revenue and the domestic manufacturing industry. After consultations, the government revised the policy, reducing the discount on the delivery values of imports to 30% for goods (from 50%) and to 10% for vehicles (from 30%).

A withdrawal of the Benchmark Discount on imported rice means that importers of rice will pay a higher amount of duty on their imports than they did under the benchmark discount regime. This will make imported rice more expensive relative to local rice, assuming all other factors are equal. As a result, price-sensitive consumers are likely to switch from imported to local rice, providing local rice producers greater access to the domestic market and enabling them to sell more and generate income.

Thus, the withdrawal of the policy benefits the President of the Professional Local Rice Growers Association (PLRGA) in the following ways:

  1. It will make local production more competitive with imported products.
  2. It will increase demand for local production.
  3. It will increase local production for rice growers and generate employment.
  • 3 Marks

PT – Nov 2021 – L2 – Q2d – Value-Added Tax (VAT), Customs, and Excise Duties

Explain what constitutes exempt supplies under the VAT Act.

What constitutes exempt supplies?

A supply is exempt when the consumer of the goods and/or services is not liable to pay VAT by law. The VAT Act specifically exempts the following items from VAT:

  1. A supply of agricultural and aquatic food products in a raw state produced in Ghana.
  2. A supply of specific live animals bred or raised in Ghana (e.g., cattle, sheep, goats, pigs, poultry).
  3. A supply of the following agricultural inputs: fishing equipment, boats, nets, and other exclusive items.
  • 2 Marks

PT – Nov 2021 – L2 – Q2c – Value-Added Tax (VAT), Customs, and Excise Duties

Explain under what condition goods applied for own consumption are treated as supply of goods.

Under what condition are goods applied for own consumption treated as supply of goods?

Goods are applied to own use when a taxable person parts with ownership of the goods. In such cases, it is deemed as a supply of goods and is made on the date on which the goods are first applied to own use. The taxable person must account for the goods alongside other supplies.

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