Page 58 - Juta's Indirect Tax

s 18 VALUE-ADDED TAX ACT 89 OF 1991 s 18
(b) capital goods have been manufactured, assembled, constructed or produced by him; or
(c) capital goods or services are deemed by subsection (4) to have been supplied to him,
and such goods or services were acquired, manufactured, assembled, constructed or produced or applied by such vendor partly for the purpose of consumption, use or supply in the course of making taxable supplies (other than taxable supplies in respect of which, if such goods or services had been acquired at the time of such application, a deduction of input tax would have been denied in terms of section 17 (2)) or of making supplies in the course of an activity which was an enterprise or would have been an enterprise if section 1 had been applicable prior to the date of promulgation of this Act (other than supplies in respect of which, if such goods or services had been acquired at the time of such application, a deduction of input tax would have been denied in terms of section 17 (2) if that section had been applicable prior to the commencement date) such goods or services shall, if the extent of the application or the use of such goods or services in the course of making taxable supplies (other than taxable supplies in respect of which, if such goods or services had been acquired at the time of such application, a deduction of input tax would have been denied in terms of section 17 (2)) is subsequent to the commencement date increased in relation to their total application or use, be deemed to be supplied to him, and the Commissioner shall allow the vendor to make a deduction in terms of section 16 (3), in the tax period during which such increase is deemed by subsection (6) to take place, of an amount determined in accordance with the formula
A 3 B 3 (C 2 D),
in which formula—
‘A’ represents the tax fraction; ‘B’ represents the lesser of—
(i) (aa) the adjusted cost (including any tax forming part of such adjusted cost) to the vendor of the acquisition, manufacture, assembly, construction or production of those goods or services: Provided that where the goods or services were acquired under a supply in respect of which the consideration in money was in terms of section 10 (4) deemed to be the open market value of the supply, the adjusted cost of those goods or services shall be deemed to include such open market value to the extent that it exceeds the consideration in money for that supply; or
[Item (aa) substituted by s. 32 (f) of Act 136 of 1991, by s. 32 (b) of Act 97 of 1993 and by s. 174 (c) of Act 45 of 2003.]
(bb) where goods or services were deemed by subsection (4) to have been supplied to the vendor, the amount which was represented by ‘B’ in the formula contemplated in that subsection when such goods or services were deemed to be supplied to the vendor; or
(cc) where the vendor was at some time after the acquisition of the goods or services required to make an adjustment contemplated in subsection (2) or this subsection the amounts represented by ‘A’ in the formula contemplated in section 10 (9) or by ‘B’ in the formula contemplated in this subsection respectively, in the most recent adjustment made under subsection (2) or this subsection by the vendor prior to such supply of goods or services so deemed to be made; and
(ii) the open market value of the supply of those goods or services at the time any increase in the extent of the use or application of the goods or services is deemed by subsection (6) to take place;
‘C’ represents the percentage that, during the 12 month period during which the increase in use or application of the goods or services is deemed to take place, the use or application of the goods or services for the purposes of making taxable supplies (other than taxable supplies in respect of which, if such goods or services had been acquired at the time of such application, a deduction of input tax would have been denied in terms of section 17 (2)) was of the total use or application of the goods: Provided that where the said percentage does not exceed the percentage contemplated in ‘D’ by more than 10 per cent of the total use or application, the said percentage shall be deemed to be the percentage determined in ‘D’;
‘D’ represents the percentage that the use or application of the goods or services for the purposes of making taxable supplies (other than taxable supplies in respect of which, if such goods or services had been acquired at the time of such application, a deduction of input tax would have been denied in terms of section 17 (2)) was of the total use or application of such goods or services determined in terms of section 17 (1), section 10 (9) or subsection (4) of this section or this subsection, whichever was applicable in the period immediately preceding the 12 month period contemplated in ‘C’:
Provided that—
(i)
this subsection does not apply to—
(aa) capital goods or services which cost less than
R40 000 (excluding tax) or where such goods or services were deemed to be supplied to the person by subsection (4) if the amount which was represented by ‘B’ in the formula contemplated in that subsection was less than R40 000 when such goods or services were deemed to be supplied to such person;
(bb) capital goods or services acquired by a public authority or public entity listed in Part A or C of Schedule 3 to the Public Finance Management Act, 1999 (Act 1 of 1999), prior to 1 April 2005, or if an input tax deduction in respect thereof was denied under proviso (iv) to section 18 (4); or
(cc) capitalgoodsorservicesacquiredbyamunicipality prior to 1 July 2006, or if an input tax deduction in respect thereof was denied in terms of paragraph (v) of the proviso to section 18 (4);
[Sub-para. (cc) added by s. 49 (1) (f) of Act 9 of 2006.]
(ii) ....
[Para. (ii) deleted by s. 149 (1) (b) of Act 22 of 2012 – date of commencement deemed to have been 10 January 2012. The deletion of the paragraph applies in respect of supplies made on or after that date.]
[Sub-s. (5) amended by s. 32 (e), (g) and (h) of Act 136 of 1991, by GN 2695 of 8 November 1991, by s. 23 (b) of Act 136 of 1992, by s. 34 (g), (h), (i), and (j) of Act 27 of 1997 and by s. 109 (1) (b) of Act 31 of 2005.]
(6) For the purposes of subsections (2) and (5), any reductionorincreaseintheextentoftheapplicationoruse of goods or services shall be deemed to take place on the last day of the vendor’s ‘year of assessment’, as de ned in section 1 of the Income Tax Act, or, if the vendor is not a taxpayer as de ned in that section, on the last day of February: Provided that where a vendor who is not a taxpayer as so de ned draws up annual nancial statements in respect of a year or other period ending on a date other than the last day of February, the reduction or increase in the
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Juta’s IndIrect tax 2016