VAT zero-rated list confusing?

Government anticipates forfeiting R2 billion in VAT revenue.

- Amanda Visser

The wording of the draft legislation giving effect to the expansion of the zero-rated value-added tax (VAT) list has caused confusion and may lead to unintended consequences.

Despite intensive lobbying to include bone-in chicken in the list, it was not included – yet it seems luxury meat items may be zero-rated from 1 May.

National Treasury also limited canned vegetables to beans and peas and not all canned vegetables, as suggested by Finance Minister Enoch Godongwana in his budget speech.

From the draft rates and monetary amounts and amendment of revenue laws Bill, it appears luxury products such as oxtail and beef tongue will be zero-rated.

Edible offal from "domesticated cattle" – including livers, hearts, kidneys, soup and marrow bones, tails, ears, tongues, intestines, cleaned tripe, heads and trotters – are included.

Edible offal from chicken includes heads, feet and giblets. The mix is the byproduct of the breast deboning process consisting of the rib cage and thigh and drum and will be standard rated at 15.5% this year and 16% next year.

Limitations

Godongwana specifically said the expanded list includes "canned vegetables". This created the impression that all canned vegetables would be zero-rated.

Gerhard Badenhorst, VAT specialist and director in Cliffe Dekker Hofmeyr's tax and exchange control practice, says it may have been too costly to zero-rate all canned vegetables.