VAT may be charged on certain brown breads

VAT may be charged on certain brown breads

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All categories of brown bread will no longer be zero-rated and consumers can expect to pay a standard VAT rate of 14% on purchases of affected categories of brown bread. This is due to a technical change contained in the recent Taxation Laws Amendment Bill, 2017.

According to an article on CNBC Africa, former Minister of Finance, Pravin Gordhan, announced in his 2017 Budget Review speech that certain amendments would be made to the Value-Added Tax Act, (‘VAT Act’) 1991. These included certain technical corrections to various items contained in the Act.

Moneyweb writes that a Practice Note previously issued by the South Africa Revenue Service (Sars) to provide guidance on the issue, implied that whole-wheat brown bread, high fibre brown bread, high protein brown bread and brown health bread were all considered brown bread and qualified as zero-rated items, but the Practice Note was subsequently withdrawn.

A 2017 updated version of the bread regulations effectively amended the definition of brown bread and includes various subclasses of brown bread under the class “brown wheat bread” classifies ‘brown wheat bread’ differently from ‘brown bread’.

Quoting Charles de Wet, head of indirect tax at PwC Africa, Moneyweb says certain categories of brown wheat bread, namely whole-wheat brown bread, high fibre brown bread, high protein brown bread and brown health bread, which qualified to be zero-rated under Schedule 2 will become standard rated (14%) on implementation of the Taxation Laws Amendment Bill, 2017.