What you should have learnt in school: A student guide to VAT

Aroma Theron

Every week, Perdeby looks at something you should have learnt in school to assist you in your day-to-day life. This week, we’ll look at understanding VAT.

Finance minister, Malusi Gigaba, announced that VAT would increase from 14% to 15% as of 1 April. So Perdeby have compiled a short crash course on all things VAT to take into consideration when you draw up your next monthly budget.

 

What is VAT?
VAT stands for Value Added Tax, and it is taxed on all goods and services sold in the country. A seller charges this VAT to the buyer, and then pays it to the government. It is the little amount at the bottom of your till slip that gets added to your total cost. Since 1993, VAT was set at 14% but has now been increased to 15%. The VAT increase is in line with other tax increases to raise money for the government to fund inclusive economic growth and social spending such as free higher education. Malusi Gigaba defends this increase by referring to other countries such as Zimbabwe, Argentina and Russia, that have a higher VAT rate than South Africa.

 

What is excluded from VAT?
There is a list of 19 basic food items that won’t be taxed. Included on this list is brown bread, rice, vegetables, fruit, eggs and milk. The reason for this concept is to lessen the burden of affording basic food items to disadvantaged people.

 

How students are affected
VAT is taxed on all goods and services sold in the country. Yes, this even includes non-tangible things like airtime, data and an extra tutor class. So, take this into account when you plan or review your monthly expenses. Another thing to take into consideration that came out of the Budget Speech is the increase in sin tax. This tax is collected on all tobacco and alcoholic products. The increase is between 6% and 10%, which means that a can of beer or cider will cost 15c extra, and wine will cost an extra 23c per litre. When it comes to cigarettes, a box of 20 will cost an extra R1,22.

 

Photo: Elmarie Kruger

 

 

 

 

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