Page 513 - Juta's Indirect Tax

BGR 005 VALUE-ADDED TAX ACT: BINDING GENERAL RULINGS BGR 006 (2)
4. Issues
The issues under consideration are whether a rebate is regarded as a –
• reduction in the purchase price in which case a credit note must be issued; or
• consideration for a supply of a service in which case a tax invoice must be issued.
5. The law and its application
A vendor making a taxable supply must issue a tax invoice for goods or services supplied to a recipient within 21 days of making that supply. The recipient must retain the tax invoice to substantiate any input tax deduction for the goods or services acquired. Tax invoices form part of the records that vendors (that is, suppliers and recipients) are required to keep under section 55, and are used to create a paper trail for audit purposes.
The details shown on a tax invoice may, in certain circumstances, be incorrect due to various reasons, for example, due to the granting of discount. Section 21 therefore makes provision for a credit or a debit note to be issued in these instances.
5.1 Instances in which credit notes must be issued (Section 21)
A supplier (or the recipient*) is required to issue a credit note for a rebate granted if the rebate–
• alters the original purchase price of a supply of goods or services in terms of an agreement with the recipient; and
• results in the tax charged on the tax invoice in relation to that supply being incorrect (that is, the amount of tax charged
shown on the tax invoice exceeds the actual tax charged).
A credit note must contain the particulars speci ed in section 21(3).
5.2 Instances in which a tax invoice must be issued
A credit note cannot be issued in instances where a rebate does not adjust the price at which goods and services were originally supplied.
A rebate granted to a dealer or nance company for having performed a speci c function or tasks (for example, providing speci c advertising services), is considered to be a supply of services from the dealer or nance company to the manufacturer. Rebates granted to compensate, subsidise, reward or reimburse a dealer or nance company for expenses incurred for, or activities undertaken on behalf of the manufacturer constitutes consideration for a separate supply of a service by the
dealer or nance company to the manufacturer.
The dealer or nance company, as supplier of these services, must issue a tax invoice within 21 days from the date of
these services in accordance with section 20.
5.3 Recipient-created tax invoices, debit and credit notes
To the extent that circumstances exist where a supplier is unable to issue a tax invoice, debit or credit note due to circumstances beyond the supplier’s control, provision is made for the Commissioner to allow the recipient of a supply to issue a tax invoice for a supply made by a supplier.
The circumstances considered to be beyond the supplier’s control are where the recipient of the supply is—
• in control of determining the quantity or quality of the supply; or
• responsible for measuring or testing the goods sold by the supplier.
Interpretation Note No. 56 deals with recipient-created tax invoices, credit notes and debit notes and states which conditions must be met to allow the recipient to issue these documents.
6. Ruling
The Commissioner, with regard to rebates granted in the motor industry, issues the following binding general ruling (BGR).
The manufacturer must issue a tax invoice, except if the provisions of section 20(2) apply, where the rebate is regarded as consideration for the supply of a service. A credit note must be issued by the manufacturer, except if the provisions of section 21(5) apply, where a rebate is regarded as a reduction in the original purchase price. The credit note must satisfy the requirements of section 21(3).
This BGR is conditional upon the vendor maintaining a list of all rebates granted or received at the beginning of each calendar year, as and when the agreement is amended which indicates whether the rebate results in a tax invoice, credit note or debit note being issued. Such list as well as agreements or statements substantiating this classi cation must be retained as part of record-keeping requirements contemplated in section 55.
To the extent that this BGR does not provide for a speci c scenario in respect of rebates granted or received, a VAT ruling must be applied for from SARS.
This BGR is issued in accordance with section 76P of the Income Tax Act, No. 58 of 1962, as made applicable to the VAT Act by section 41A. This ruling is effective from the date of issue until it is withdrawn, amended, the relevant legislation is amended or a decision of the courts differ materially from this ruling.
DATE: ACT: SECTIONS: SUBJECT:
BINDING GENERAL RULING (VAT): BGR 6 (ISSUE 2)
19 June 2012
VALUE-ADDED TAX ACT 89 OF 1991 (the VAT Act)
SECTIONS 1, 20 and 21
DISCOUNTS, REBATES AND INCENTIVES IN THE FAST MOVING CONSUMABLE GOODS INDUSTRY
* The Commissioner, under section 21(5), may in certain circumstances direct that the recipient, as opposed to the supplier, may issue a credit note.
Juta’s IndIrect tax 2016 505