SARS announced exemption from VAT on importation of essential goods as defined in the Regulations published in the Government Gazette No 43148 specific to the COVID19 pandemic. The VAT Act charges VAT in terms of section 7.  

Section 7(1)(b) provides for VAT on importation of goods. When the Importer imports goods into the country, they normally pay VAT before goods are released by SARS’ Customs, irrespective of whether the goods are destined for home consumption or for wholesale by local traders. This tax is payable whether the importer is registered for VAT or not. For COVID19 purposes, the government has provided a relief to importers from Import VAT as per the above Regulations. This is part of government’s strategy to provide relief to businesses supplying ‘essential goods’ to combat the virus so that they are not cash strapped as we need these products in huge volumes and couldn’t afford the time lapse between paying and claiming the VAT back from SARS through the normal process. BUT FOR THIS SPECIFIC RELIEF FOR COVID19 PURPOSES, SECTION 7(1)(b) WOULD BE APPLICABLE AND THE IMPORTERS WOULD BE LIABLE FOR IMPORT VAT.  

THE NORMAL VAT RULES AS PER THE CHARGING SECTION IN SECTION 7(1)(a) HAVE NOT BEEN TOUCHED BY THESE REGULATIONS AND THEY APPLY WHEN THE SAME IMPORTED ESSENTIAL GOODS ARE RESOLD LOCALLY. THE IMPORTER/SUPPLIER MUST CHARGE OUTPUT VAT TO ITS CUSTOMERS AND THOSE BUYING TO ALSO SELL MUST CHARGE VAT UNTIL THE END CONSUMER. ALL THESE TRANSACTIONS WILL ALLOW THE PARTIES TO CLAIM THE VAT BACK FROM SARS, WITH THE EXCLUSION OF THE END CONSUMER.  

THE PRESIDENT ANNOUNCED YESTERDAY THAT VAT REFUNDS WILL BE ACCELERATED. LET US DO THE RIGHT THING SO WE CAN SLEEP BETTER  

Most of the COVID19 players are of the believe that there is no VAT at all for these essential goods. I have given opinions about this and while others are receptive, we are still getting resistance because participants want to make a quick buck. Comments range from but the President and SARS made it very clear that there is no VAT during COVID19 to oh no these are essential services and VAT was never applicable and at any rate, where will we claim this VAT back as SARS is not working ???? Not true  

THE CONSEQUENCES OF IGNORING THIS ARE DISASTROUS BECAUSE AFTER THE FACT, IN THE MONTHS OR YEARS TO COME, SARS WILL AUDIT THESE COVID19 TRANSACTIONS. THESE ARE HUGE AMOUNTS AND CANNOT BE IGNORED. THEY GO THROUGH BANK ACCOUNTS; THEY LARGELY CANNOT BE CASH TRANSACTIONS AS THEY RUN INTO TENS AND HUNDREDS OF MILLIONS. SARS CANNOT BE OUT OF POCKET. CURRENT TRANSACTORS RISK THE RECOUPMENT OF THE VAT PLUS INTEREST AND PENALTIES. THIS WILL DESTROY OUR SMALL AND MEDIUM BUSINESS COMMUNITIES AND WE CANNOT AFFORD THIS AS A COUNTRY. WITH A SARS LIABILITY THIS HUGE, MOST WILL GO UNDER. WE NEED INTERVENTION TO LEVEL THE PLAYING FIELD BECAUSE THE BIGGEST CONCERN IS BEING COMPETITIVE BECAUSE IF ENTITY A CHARGES VAT AND ENTITY B DOESN’T, THE PRICE COMPETITION AND SHORT-TERM GAINS MEAN COMPANY B IS IN BUSINESS AND COMPANY A IS OUT OF BUSINESS FOR BEING TOO EXPENSIVE BECAUSE OF THE VAT COMPONENT. LATER COMPANY B WONT BE IN BUSINESS TOO BECAUSE SARS WILL WANT THE VAT PORTION.

This post originally appeared on LinkedIn here