Taxable activity means an activity which is carried on by a person(a) in the country, or (b) partly in the country, whether or not for a monetary profit, that involves or is intended to involve, in whole or in part, the supply of goods or services to another person for consideration.  (1 mark)

Taxable Activity specifically includes:

• The supply of staff;
• An activity of a local authority or unincorporated association or body that involves, in whole or in part, the supply of goods or services to another person for consideration
• The processing of data or supply of information or similar service;
• The making of gifts or loans of goods;
• The leasing or letting of goods on hire;
• The appropriation of goods or services for personal use or consumption by the taxable person or by any other person;
• The sale, transfer, assignment or licensing of patents, copyrights, trademarks, computer software and other proprietary information;
• The export of non-traditional products.       (Any 2 points @ 0.5 mark each)
  

The supply of goods and services is exempt supply when there is NO VAT charged.     (1 mark)
These are:

• Accommodation at schools and hospitals
• A supply of the following agricultural and aquatic food products in a raw state produced in the country. A supply of the following live animals bred or raised in this country: (a) cattle; (b) sheep; (c) goat; (d) swine; and (e) poultry.
• A supply of water, excluding water commonly supplied in bottles or other packaging suitable for supply to consumers
• A supply of laboratory and library equipment for use in rendering educational services.
• A supply of medical services and medical supplies.      (Any 2 points @ 0.5 mark each)

A supply is said to be a relief supply if the transaction is taxable under normal rules but the status of the taxpayer makes it effectively zero- rated that is not taxed when being sold.    (1 mark)
The beneficiaries of relief under the law include:

• The President of the Republic of Ghana.
• For the use of any Commonwealth or Foreign Embassies and Missions or consulate
• Emergency Relief items approved by Parliament
• Other International Agencies subjects to Agreement with the Government of Ghana.
• A supply for the use of a permanent member of the Diplomatic Service of any Commonwealth or foreign country that is exempted by Parliament from the payment of customs duties.    (Any 2 points @ 0.5 mark each)
  

This refers to the supply of goods and services whose output tax is zero.   (1 mark)
Examples of zero rated items:

• A supply of services directly in connection with land or any improvement to land situated outside the country.
• A supply of services directly in respect of personal property situated outside the country at the time the services are rendered.
• A supply of services to the extent that the services are consumed elsewhere than in the country.
• A supply of freight and insurance directly attributable to the export of goods.
• A supply of goods where the Commissioner-General is satisfied that the goods have been exported from the country by the supplier without having been used in the country after the supply was entered, except as necessary for or incidental to, the export of the goods.
• A supply of goods under a rental agreement, charter party or agreement for chartering, where the goods are used exclusively in an export country.              (Any 2 points @ 0.5 mark each)
  

A person who is engaged in a taxable activity and is not registered for tax purposes shall register if:

• At the end of any period of twelve or less months, the person made, during that period, taxable supplies exceeding two hundred thousand Ghana Cedis; or
• At the end of any month, there are reasonable grounds to expect that that person will make taxable supplies in the next twelve or less months exceeding two hundred thousand Ghana Cedis or a period of three months or less, the taxable supplies will exceed fifty thousand Ghana cedis or at the end of any month, there are reasonable grounds that it will exceed fifty thousand Ghana cedis in three month period or less.
  

Except as otherwise provided in Value Added Tax Act, 2013 (Act 870), as amended, a person who is engaged in a taxable activity and is not registered for tax purposes shall register if:

• At the end of any period of twelve month or less months, the person made, during that period, taxable supplies exceeding two hundred thousand Ghana cedis; or
• At the end of any month, there are reasonable grounds to expect that that person will make taxable supplies in the next twelve or less months exceeding two hundred thousand Ghana cedis.

Despite the above provisions, a person shall register if:

• At the end of any period of three months, the person made, during that period, taxable supplies exceeding, fifty thousand Ghana cedis; and
• There are reasonable grounds to expect that the total value of the taxable supplies made by that person during that period and to be made during the next consecutive nine months will exceed two hundred thousand Ghana Cedis.

All things being equal, and assuming there are no reasonable grounds to estimate future sales, during the first three months of April to June, sales was GH¢29,500 x 3 = GH¢88,500. This is more that GH¢50,000 for the first three months. Registration is due before the end of the month following the month in which the limit is exceeded, so Mr Patapaa should register by 31st July or within 30 days.

If Mr Patapaa continued to trade after 31st July, which he did, without registering for VAT, he would still have to pay for the VAT due from the time he should have registered.

A person who fails to apply for registration is liable to a penalty of not more than two times the amount of tax on taxable supplies payable from the time the person is required to apply for registration until the person files an application for registration with the Commissioner-General.

The matter is one of professional judgement and the Accountant would be expected to act honestly and with integrity. If Patapaa refuses to register for VAT, the Accountant would be obliged to report the company to the Ghana Revenue Authority. The Accountant should cease to act for Mr Patapaa and need to provide reasons for unable to work for him.

• A promoter of public entertainment,
• An auctioneer, or
• A national, regional, local or other authority or body, which carries on any taxable activity shall apply for registration
  (Any 2 points)

Vat Rate = 15%

ii) VAT = (Rate/117.5)* Amount
.       = (15/117.5)*3,000,000  = GH¢ 382,978.72

iii) NHIL Rate = 2.5%

NHIL = (Rate/117.55)* Amount
.          =  (2.5/117.5)*3,000,000 = GH¢ 63,829.79 
VAT/NHIL = 382,978.72 + 63,829.79 = GH¢ 446,808.51

i) Amount inclusive CST = (3,000,000 – 446808.51)
.                                           = 2,553,191.49
Rate of CST = 6%
CST = (Rate/106) *Amount
.       = (6/106) *2,553,191.49  = GH¢144,520.27
Comments:
VAT/NHIL are the last tax to be imposed and working in reverse, shall be the first to be deducted

Credit due from Commissioner – General is 22,230.25

Exempt supply: The supply of goods and services specified in the First Schedule is an exempt supply and not subject to the tax. Some supplies specified in the First Schedule are “commercial rental establishment”, “dwelling”, “estate developer”, “education services”, “financial services”, “medical services”, and “medical supplies. A supply of goods or services is not an exempt supply if that supply is subject to tax at the rate of zero percent under section 36, Zero-rated supply 36.

A zero rated supply is taxable at a zero rate if the supply is specified in the Second Schedule. Some supplies specified in the Second schedule are “Exports from this country, “Foreign-going aircraft”, “Free zone”, “Free zone enterprise”, “Conveyance”, Where a taxable person has applied the rate of zero percent to a supply under this section, the taxable person is required to obtain and retain the documentary proof that is acceptable to the Commissioner-General and that substantiates the person’s entitlement to apply the zero rate to the supply.

A taxable person registered for VAT, is required to claim input VAT on the acquisition of goods and services which are business related and also required to pay output VAT on goods and services. In effect, the net is claimable or payable (i.e. input tax-output tax). If the input tax exceeds the output tax, it is claimable and if the output tax exceeds the input tax, it is payable.    (2 marks)

If the input tax paid by the registered person is denied, the supply of the goods and services by the taxable person is a supply of goods and services other than in the course or furtherance of a taxable activity.     (1 mark)

Conclusion:
Eddie Enterprise ltd was denied the claim of VAT paid on the importation of a vehicle. The proposed sale of the vehicle shall be deemed as sale that will not attract output VAT in accordance with section 25 of Act, 2013 Act 870 as amended.  (2 marks)

Input VAT paid for goods and services are claimable by a VAT registered trader and by the same token, is (trader) required to account for output VAT when it parts with ownership of the assets.   (1 mark)

Under section 48(4) (b) of Act 2013 Act 870, input tax deduction shall not be made after the expiration of a period of six months after the date the deduction accrues.
The taxpayer’s right to claim is extinct under the above situation, if it is not exercised at the right time that is after 6 months.  (2 marks)

Conclusion:
For failure to claim the input tax within 6 months, Bossman ltd has lost the right to claim but must charge and account for VAT on the sale of the assets accordingly as the failure to claim is not a denial of claim.   (2 marks)

A supply is said to have taken place on the earliest of the occurrence of any one of the following events:

• The goods are removed from the taxable person’s premises;
• Where the goods are made available to the person to whom they are supplied;
• Receipt of payment is made;
• Tax invoice is issued.

i) The firm should write off the sales as bad debts in its books,
Inform the Commissioner-General in writing supporting the report with official liquidation
The firm, on the basis of the above, can put in a claim for the input tax on the bad debt as an adjustment in line with section 46 of the VAT ACT 2013, Act 870

ii) The taxable value according to section 43(4) under this situation would be based on the total amount of the installments. The tax will be calculated on the full value at the time of supply and not when the installment is paid. The price shall exclude the interest or finance charges.

iii) Regulation 17 of the VAT Regulation 1998 states that “where goods are supplied on sale or return, the tax point shall be the earliest of
a. The date when the purchaser chooses to keep the goods; or
b. The issue of a tax invoice by the seller, or
c. The receipt of payment by the seller, other than a deposit; or
d. The expiry of the period within which the customer may return the goods; or
e. Twelve months after the date of dispatch by the seller

iv) The customers should first obtain a copy of their relief letter/documents. Reliefs per section 38 of the VAT Act and the Third Schedule allow Vat registered manufacturers for raw materials at importation. The case however seems to suggest local purchases, and thus the Manufacturing company cannot claim relieve from such purchases. The company would thus have to claim the VAT, from Jude Power.                       (2.5 marks for point (i)-(iv) = 10 marks)

1. The business must be registered for VAT that is he/she must be a registered VAT trader
2. The business must have submitted returns for all months for which it has been in operations.
3. The business must complete and submit a prescribed VAT claim form for the refund of the VAT paid to the VAT Service
4. The business must be engaged in the export of 25% or more of the output
5. Total export proceeds should have been repatriated by importer’s bank to exporter’s authorized dealer banks in Ghana
6. The VAT paid should qualify as deductible input VAT
7. The input VAT paid should exceed the output VAT paid
8. Possession of all original tax (vat) invoices
9. Where the credit remains outstanding for a continuous period of three months or more

Section 19 of Act 2013 Act 870 states the following as condition under which the Commissioner General shall cancel the registration of a person
Where the person:
i. No longer exists;
ii. Is not carrying on a taxable activity;
iii. Is not required or entitled to apply for registration;
iv. Has no fixed place of business or abode;
v. Has not kept proper accounting records related to a business activity carried on by that person; or
vi. Has not submitted regular and reliable tax returns required under the Act.                                (5 Marks for any 5 points)