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VAT : The Transitional Period

The GST Act will be repealed on 30 June 2012. The last return will be due by 21 July, 2012. To replace the GST there will be the Value Added Tax (VAT) which will come into operation on 1 July 2012. Under VAT all VAT registered businesses will have to charge VAT on the sale of their goods and services.

There is a concern, however, that tax will be paid twice on the same goods in view that GST would have been paid on the goods purchased prior to 30 June 2012 and VAT will apply on the sale of the same goods if still in stock when VAT is introduced.

SRC would like to reassure businesses that this will not be the case as the VAT Act, 2010 has allowed for transitional provisions to deal with this particular issue. The transitional provision is there to ensure that the same good is not liable to both GST and VAT.

How will the transitional rules apply?
All VAT registered business will be able to claim an input tax credit for the GST paid on the goods still in stock after 30 June 2012 when they submit their first VAT return which will be due by the 21 August 2012. However, VAT registered businesses can only claim an input tax credit if the following conditions are met:
  • The goods were bought no more than 6 months before VAT introduction;
  • The goods are used for business purposes;
  • The goods are used for making taxable supplies;
  • The same goods are not exempted under the VAT Act;
  • There are satisfactory documents to prove to that GST has been paid on those goods.
If the Revenue Commissioner is satisfied that those conditions have been met, the GST paid on these goods will be offset against the VAT collected. When GST is not been fully offset against output tax, the credit can be carried forward for at least a period of 3 months after which SRC can refund the taxpayer.

What must VAT registered businesses do that want to claim an input tax credit for the GST already paid?
Businesses will need to ensure that:
  • They carry out an inventory of goods in stock by the end of June 2012 so as to claim input tax credits the following month which will be 21 August 2012.
  • They must keep relevant records / documents which correlates with the stock on the Bills of Entry.
  • All the relevant records / documents are made available if and when requested by SRC.
N.B: Businesses will not be able to claim input tax credits on goods in stock for 2010 and 2011 as they have already claimed the credits in their tax returns for previous years.

For more information
You can contact Seychelles Revenue Commission on 4293737 or email us at advisory.center@src.gov.sc.
The Value Added Tax Act, 2010 is available here.


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