Bizblog term of the week: Value added tax(VAT)

       Value added tax is a tax payable by individuals or organisation on consumption of goods and services.There are exemptions to items that should be charged against VAT.Value added tax is borne by the final consumer of a good or service and it is charged at 5%.

     The tax is collected on behalf of the government by organizations which have registered with the Federal Inland Revenue Service (FIRS) for VAT purposes.VAT payment are usually made monthly to the federal inland service tax offices on or before 21st day of the month following that in which the transaction was made. 

    Simply put that VAT is a consumption tax payable by final consumer of a product or service which is deductible from the cost of such transaction.

Items exempted from Value added tax include;

• MEDICAL, VETERINARY AND PHARMACEUTICAL RAW MATERIALS AND PRODUCTS

•  BASIC FOOD ITEMS(For the purpose of VAT, basic food is defined as any unprocessed staple food item, whether or not it is packaged);- Meat of sheep or goats, fresh, chilled or frozen.

• INFANT FOOD

• BOOKS, NEWSPAPERS AND MAGAZINES

• COMMERCIAL VEHICLES AND SPARE PARTS

•  AGRICULTURAL EQUIPMENT & PRODUCTS

Services provided as follows are also exempted from VAT;

    -Medical and health care services;

    -Services rendered by Community Banks, People's Bank and Mortgage Institutions            (interest earnings on loans by commercial bank and premiums paid to insurance companies   are not vatable

   -Performance conducted by educational institutions as part of learning;

   - Social services (orphanages, charities, and fire fighting);

  -Pure postal service (excluding giro services);

  - Non-commercial cultural services;.- Non-commercial cultural services;.- Overseas air    transportation;

 - Public telephone (coin operated) and telegram services. This does not include private telephone or telephone used for business or commercial purposes