Page 410 - Juta's Indirect Tax

IN 42 VaLue-added tax act: InterPretatIOn nOtes IN 42
a. In view of the practice followed by most suppliers of game viewing services to treat their service as being ‘the transport of fare paying passengers’, it was directed that the supply of game viewing services is exempt from VAT until 31 December 2006;
b. Vendors requesting the supply of game viewing services to be subject to VAT at the standard rate of 14% before 31 December 2006, were dealt with on an ad hoc case by case basis in that these vendors were entitled to subject the supply of game viewing services to tax at the standard rate and were entitled to the input tax on the acquisition or conversion of the game viewing vehicle.
5.1 Exempt supply of game viewing
Where the vendor elected to treat the supply of game viewing as an exempt supply (subject to the conditions set out below), input tax directly attributed to the making of such supply is not claimable and must be disallowed. In this regard, such vendors were not entitled to input tax on the ‘game viewing vehicle’ acquired or converted on or after 24 January 2005 as it was not acquired for the use, consumption or supply in the course of making taxable supplies.
Furthermore, a vendor who exclusively supplied game viewing services (i.e. no other taxable supplies were made) was not carrying on an ‘enterprise’ for VAT purposes and accordingly had to be deregistered for VAT purposes. These VAT registrations, subject to the registration requirements in terms of section 23 of the VAT Act, could be re-activated on or after 1 January 2007.
In this regard, it must be noted that this concession was only permitted on condition that vendors who elected to exempt the supply of game viewing for VAT purposes were—
a. only entitled to deduct input tax on the ‘game viewing vehicle’ acquired or converted on or after 1 January 2007;
and
b. not entitled to standard rate the supply of game viewing before 31 December 2006.
This implied that vendors—
a. who, on or after 24 January 2005 and before 1 January 2007, acquired or converted a ‘game viewing vehicle’ were
not entitled to input tax on such acquisition or conversion; and
b. must have retained the exemption status on the supply of game viewing until 31 December 2006.
It must, however, be noted that SARS reserves the right to withdraw the aforementioned dispensation and raise assessments to treat the supply of game viewing as a taxable supply (i.e. standard-rated at 14%), where it is detected that vendors who have treated the supply of game viewing as an exempt supply for VAT purposes and have claimed input tax on the ‘game viewing vehicles’ acquired or converted on or after 24 January 2005. In addition, where the vendor concerned has not elected to utlise this option before 31 March 2006, such vendor must comply with the rules as set out in Standard-rated supplies in paragraph 5.3.
5.2 Standard-rated supplies to exempt supplies
a. Where a vendor has with effect from 24 January 2005 applied the standard rate to the supply of game viewing
services and has subsequently elected to exempt such supply under the dispensation contained in paragraph 5.1., the refund process must be done in compliance with the provisions of section 44 of the VAT Act. This implies that the vendor must rst refund the client the VAT charged (i.e. issue a credit note for the VAT and effect the corresponding payment to the client) and thereafter apply for a refund from SARS.
This process must take into account the reversal or disallowance of input tax previously claimed (including the
potential input tax claim on the acquisition or conversion of a ‘game viewing vehicle’).
b. Alternatively, the vendor may elect not to refund the VAT previously charged to its clients and only change the VAT status with effect from a future date. In this regard, the vendor will not be required to refund the output tax paid by its clients and SARS will not request the vendor to reverse the input tax previously claimed (excluding input tax on the ‘game viewing vehicle’ acquired or converted on or after 24 January 2005, i.e. the vendor is required to reverse
input tax claimed on the acquisition of a ‘game viewing vehicle’).
The aforementioned arrangement was only applicable to a vendor who had elected to utlise this option before 31 March 2006. Vendors that have not utilised this option before 31 March 2006 must comply with the rules as set out in standard- rated supplies in paragraph 5.3.
5.3 Standard-rated supply of game viewing
Vendors that elected to standard rate the supply of game viewing made written submission to SARS (i.e. Legal & Corporate Services — Head Of ce) for this option. On approval, the vendor was permitted to standard rate the supply of game viewing and was entitled to deduct input tax on all expenses (subject to the provisions of section 17 of the VAT Act) incurred in the course or furtherance of rendering such services. In addition, such vendors that have acquired or converted ‘game viewing vehicles’ on or after 24 January 2005 were entitled to deduct input tax on such expenses.
5.4 Assessments
In circumstances where SARS has raised assessments to standard rate the supply of game viewing services that were being treated as an exempt supply by vendors, such vendors who elected to exempt the supply of game viewing must make written requests to the SARS branch of ce to rectify the relevant assessments.
5.5 The supply of game viewing on or after 1 January 2007
a. The supply of game viewing will be subject to VAT at the standard rate of 14%; and
b. vendors will be entitled to deduct input tax on the ‘game viewing vehicle’ acquired or converted on or after 1
January 2007.
5.6 General
All rulings issued in respect of game viewing services are hereby withdrawn in terms of section 5 (2) of the VAT Act with effect from 19 October 2005.
6. Tax invoices
A registered vendor making a taxable supply must issue a tax invoice within 21 days of making such supply (i.e. this is irrespective of whether the recipient of the supply requests a tax invoice). To constitute a valid tax invoice, the relevant
402 Juta’s IndIrect tax 2016