The Ministry of Finance notes with consternation an article published in the Guyana Times today April 20, 2018, ‘Govt moving to tax manufacturing exports.’
The article alleges that ‘local Guyanese exporters are next in line to be taxed by the current Government as serious consideration is being given to have the zero-rating of exports for Value Added Tax (VAT) purposes removed.’
The Ministry categorically denies this allegation and makes pellucid that the export of taxable items remains Zero- Rated.
Since the implementation of VAT in 2007, it has not been charged on exports as a relief for exporters, and that has NOT changed. Furthermore, there have been NO discussions or contemplations to charge VAT on exports.
Please be assured that such a proposal with far-reaching consequences would not be introduced without proper consultation and analysis of the impact on the manufacturing sector, and the export and local economy.
The Ministry is therefore appealing to persons to cease reporting unsubstantiated claims and malicious allegations without confirming the facts, and unnecessarily alarming and misleading members of the public to score cheap political points.
As provided in the VAT legislation, there is a distinction between Zero-Rated Supplies and Exempt Supplies. Exempt items/supplies are not considered taxable supplies and are therefore not subject to VAT whether locally supplied or exported. On the other hand, taxable supplies are subject to VAT and include items taxed at the rate of zero (Zero rated) and items taxed at the rate of 14% (Standard rated).
For further clarity, VAT is not charged on Zero rated supplies but the VAT registrant is entitled to claim or recover input VAT credits since the good or service is considered a taxable activity. On the other hand, an exempt supplier is not required to charge VAT and is also not allowed to reclaim VAT.
It should be noted in accordance with Section 17 and 18 of the VAT Act, where the local supply of goods is taxable or zero-rated, they are zero-rated for export. In these cases, input VAT incurred can be recovered. However, if the local supply of goods is exempt then the export of these items is considered an exempt supply. Input VAT incurred in the production of exempt items cannot be recovered whether for local supply or export.
Initiatives were taken to exempt or zero rate raw materials and other items used in the manufacturing/ export sector to reduce the burden of VAT. Please refer to the extensive revised list of Zero-Rated and Exempt supplies which identifies among other things, raw and packaging materials; lumber; and investment/local manufacturing. This list which accords with Schedules l and ll to the Value-Added Tax Act, Cap 81:05 was widely publicized by the Guyana Revenue Authority (GRA) in January 2018 and can be found on its website, www.gra.gov.gy.