Feeling the pinch

CITIZENS and residents have urged authorities to take strict steps over rising prices of commodities that are not subject to Value Added Tax (VAT).

They stressed the need to step up inspections of commercial outlets, warning that some traders may exploit the decision to double VAT to 10 per cent by raising prices of basic consumer goods not subject to the tax.

They told our sister paper Akhbar Al Khaleej that consumers and merchants should be more aware about the value added tax mechanism.

It makes no sense if a trader or shop owner doesn’t know how to calculate VAT or can’t answer consumers’ inquiries in a decent and respectful manner, they pointed out.

A number of tax experts have clarified that shops and companies which calculate VAT on products exempted from the tax have to take into account the service provided and not the product itself.

The mechanism for VAT calculation consists of payment and collection of the tax at every stage of the supply chain, from the supplier’s purchase of the product to retail sale, with the end-user bearing the cost of the added value.

This has been confirmed by the hotline of the Government Services Contact Centre, underlining the existence of a tangible commodity and a service provided.

Most goods and services are subject to VAT except for the 94 goods announced earlier. For instance, when you go to a shop and ask for green tea – which is exempt from tax – the tax rate is calculated in the total amount based on the service provided and not the product itself.

The centre pointed out that the same principle applies to other restaurants and shops. In return for providing the service, a value-added tax is calculated at 10pc, even if the final product consists of goods and basic materials that are exempt from the tax.

Industry, Commerce and Tourism Ministry assistant under-secretary for control and resources Abdulaziz Al Ashraf urged traders not to exploit the current circumstances as this would stir up people’s anger and tarnish the government’s reputation.


Source: https://www.gdnonline.com/Details/1019113/Feeling-the-pinch


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