Question

Explain the difference between the three different GST qualifications: (a) (b) (c) Standard (i.e. 15%) Zero-rated Exempt

Answer 1

All supplies could be classified as exempt, zero rated or standard rated for GST purposes. Supplies that are standard rated or zero-rated are considered to be 'taxable supplies' as defined

The supply of goods and services are generally subject to GST at the standard rate (15%), unless such supply is specifically zero-rated or exempt in terms of the GST Act, Schedule III & IV respectively.

A zero-rated supply is a taxable supply on which GST is levied at the rate of 0%. No output tax will be payable to Inland Revenue in respect of zero-rated supplies. Registered GST entities making zero-rated supplies are entitled to claim their input tax deductions on goods or services acquired in the course of making such taxable supplies.

An exempt supply (i.e. not a taxable supply) is the supply of goods or services on which no GST rate is chargeable. Registered GST entities may not claim an input tax deduction in respect of goods or services acquired in the course of furtherance of making exempt supplies. A person that makes only exempt supplies cannot register for VAT as they are not providing taxable supplies as per the GST Act.

Where goods and services are purchased for taxable and non-taxable purposes, only a portion of the input tax may be claimed. GST registered entities making mixed supplies (taxable and exempt supplies), are required to apportion their input deduction to the extent to which the entity has utilised the goods or services in the course and furtherance of making taxable supplies.

Confusion often exist about ‘VAT at a Zero-Rate’, ‘Exempt supply’ and ‘Non-supply’. The main difference between zero rate and exempt supplies is that the suppliers of zero-rated goods and / or services can still reclaim all their input VAT, but the suppliers of exempt goods are either not registered for VAT or if they are, they cannot reclaim their input GST.

Examples of GST at a Zero rated items and services

include:

•Petrol leaded or unleaded;

• Mahango, mahango meal, maize meal and bread, but not as a prepared meal;

•Water and electricity to a residential account;

•Selling of residential property;

•Fresh milk

Examples of Exempt goods and services that do not

have GST on them, not even at 0%:

•medical and paramedical services;

•educational services;

•the letting of accommodation as a residential

property – a dwelling;

•public transport, example transport with taxi

•fringe benefits given by employers to employees;