Solution for Question Three (August 2024 VAT Calculation)
We are tasked with calculating the
VAT due to TRA (Tanzania Revenue Authority) or the
VAT refundable to the trader, based on the provided
purchases and
sales.
Details from the Question:
Purchases (VAT Exclusive):
1.
Leather (Imported - CIF): 50,000,000 TZS
2.
Insurance of Motor Vehicle: 4,200,000 TZS
3.
Radio Broadcasting (Advertisement): 5,000,000 TZS
Sales (VAT Exclusive):
1.
Sales of leather handbags: 24,000,000 TZS
2.
Children Books: 8,000,000 TZS
3.
Printed Books: 16,000,000 TZS
4.
News Print (Export): 4,200,000 TZS
VAT Rate:
- 18% VAT applies to most purchases and sales (except for exports).
- Excise Duty (5%) is applicable on purchases for certain goods (like imported leather).
- For exports, VAT is 0%, meaning no VAT is paid on exports.
---
Step 1: Calculate VAT on Purchases
We will calculate the VAT on each purchase based on the VAT rate of
18% (except for items that are exempt, like exports).
1. Leather (Imported - CIF):
-
VAT on Imported Leather:
18%× 50,000,000 = 9,000,000 TZS
2. Insurance of Motor Vehicle:
-
VAT on Insurance:
18%× 4,200,000 = 756,000 TZS
3. Radio Broadcasting (Advertisement):
-
VAT on Radio Broadcasting:
18%× 5,000,000 = 900,000 TZS
Total VAT on Purchases:
9,000,000 + 756,000 + 900,000 = 10,656,000 TZS
---
Step 2: Calculate VAT on Sales
We now calculate VAT on the sales items. Remember that
exports are not subject to VAT.
1. Sales of Leather Handbags:
-
VAT on Leather Handbags:
18%× 24,000,000 = 4,320,000 TZS
2. Children Books:
-
VAT on Children Books:
18%× 8,000,000 = 1,440,000 TZS
3. Printed Books:
-
VAT on Printed Books:
18%× 16,000,000 = 2,880,000 TZS
4. News Print (Export):
-
VAT on News Print (Export):
Since
exports are VAT-exempt (0%), no VAT is charged on this sale.
Total VAT on Sales:
4,320,000 + 1,440,000 + 2,880,000 = 8,640,000 TZS
---
Step 3: Determine the VAT Payable to TRA or Refundable to the Trader
Now, we calculate the
VAT due to TRA or the
VAT refundable to the trader by comparing the VAT on sales with the VAT on purchases:
-
VAT Payable to TRA (when VAT on sales is greater than VAT on purchases):
If VAT on sales is higher, the trader must pay the difference to the TRA.
VAT Payable to TRA = VAT on Sales - VAT on Purchases
VAT Payable to TRA = 8,640,000 - 10,656,000 = -2,016,000 TZS
Since the
VAT on purchases is higher than the
VAT on sales, the trader
is entitled to a refund of the VAT difference.
-
VAT Refundable to the Trader:
VAT Refundable = 2,016,000 TZS
---
Final Answer:
The trader is entitled to a
VAT refund of 2,016,000 TZS from the Tanzania Revenue Authority (TRA).
