Chapter 24

Value Added Tax

Output Tax -> VAT On sale

Input Tax -> VAT on purchase

Prompt payment discount = Settlement discount = Cash discount

Taxable Supplies => Standard rated (20%) charge Output VAT => Input VAT recovered
=> zero rated (0%) charge Output VAT => Input VAT recovered

Exempt Supplies => Not charge Output VAT => Input VAT cannot recov

VAT Registered Business VAT Non-Registered Business

Sale 100000 100000
Output VAT(20%) 20000 0
Total 120000 100000

Input VAT recovered Input VAT cannot recovered.

Registeration
1. Compulsory Registeration
- Historical Test - cumulative turnover > 85000
Notice date -> within 30 days
Registered business -> 1st day of second month

- Future Test - cumulative turnover following 30 days>85000

Notice date -> within 30 days from that date
Registered business -> Beginning of that period

Example 3
Sale
Jan-19 8000
Feb-19 8000
Mar-19 8000
Apr-19 8000
May-19 8000
Jun-19 8000
Jul-19 8000
Aug-19 8000
Sep-19 8000 72000
Oct-19 8500 80500
Nov-19 8500 89000 > 85000
Historical Test
Notice date => within 30 days = 30 Dec 2019
Registered date => 1st day of second month = 1 Jan 2020

Example 4
Taxable supplies (A+B)
Feb-19 11000
Mar-19 11000
Apr-19 11000
May-19 11000 44000
1 June 2019 date 11000 + 75000 following 30 days = 44000+11000+75000

Future test
Notice date => within 30 days = 30 June 2019
Registered date => beginning of that period = 1 June 2019
=> Input VAT recovered
=> Input VAT recovered

=> Input VAT cannot recovered

130000 > 85000