Chetan Suri
<p style="text-align:justify"><strong>On March 3, 2018</strong> FTA has given a clarification that determine whether it is the supplier or end-consumer that bears the cost of the Value Added Tax (VAT) on goods and services set to be delivered fully or partially in 2018, but had been contracted before the implementation of VAT.</p> <p style="text-align:justify"><span style="color:#8B4513"><strong>FIRST QUESTION WHICH COMES TO MIND IS: WHAT ARE THE CASES WHERE VAT SHALL APLLY AND THE CASES WHERE IT SHALL NOT APPLY? </strong></span></p> <ol> <li style="text-align:justify"><span style="color:#8B4513"><strong>GOODS</strong></span></li> </ol> <p style="text-align:justify"> </p> <ol style="list-style-type:lower-alpha"> <li style="text-align:justify">Where goods received before Jan 2018, but payment received in 2018:</li> </ol> <p style="text-align:justify"> In this case VAT shall not be applicable. For example, you bought a car in 2017 and you are paying it using a 3-year loan.</p> <p style="text-align:justify"> The monthly payments are not subject to VAT.</p> <p style="text-align:justify"> b. Where payments are made before 2018, whether fully or partially, however; goods received in 2018:</p> <p style="text-align:justify"> In this case VAT shall be applicable. For example, you paid for a car in 2017 but received it in 2018. Amount is subject to 5% VAT.</p> <p style="text-align:justify"> </p> <p style="text-align:justify"><strong> 2. <span style="color:#8B4513">SERVICES</span></strong></p> <p style="text-align:justify"> </p> <ol style="list-style-type:lower-alpha"> <li style="text-align:justify">Where Service is provided before 2018 and payment is made in 2018:</li> </ol> <p style="text-align:justify"> VAT shall not be applicable.</p> <p style="text-align:justify"> b. Where service is paid before 2018 and service is provided in 2018:</p> <p style="text-align:justify"> VAT shall be applicable.</p> <p style="text-align:justify"> c. Services paid before 2018 and services provided partially in 2017 and partially in 2018:</p> <p style="text-align:justify"> VAT shall be applicable for those part of services which is provided in 2018.</p> <p style="text-align:justify"> </p> <p style="text-align:justify"><span style="color:#8B4513"><strong>SECOND QUESTION WHICH COMES TO MIND IS: WHO WILL PAY VAT IN ABOVE CASES?</strong></span></p> <ol> <li style="text-align:justify"><span style="color:#8B4513">Where contract states amount is excluding VAT:</span></li> </ol> <p style="text-align:justify"> In this case, VAT shall be paid by recipient.</p> <p style="text-align:justify"> 2. <span style="color:#8B4513">Where contract states amount is including VAT:</span></p> <p style="text-align:justify"> In this case, VAT shall be paid by supplier.</p> <p style="text-align:justify"> 3. <span style="color:#8B4513">Where contract does not mention for VAT(imp)</span></p> <ol style="list-style-type:lower-alpha"> <li style="text-align:justify">First case, amount of contract shall be treated as inclusive of tax, where recipient is a consumer.</li> <li style="text-align:justify">Second case, amount shall be treated as exclusive of tax, where recipient is registered for tax and will be able to recover it.</li> </ol> <p style="text-align:justify"> </p> <p style="text-align:justify"><span style="color:#8B4513">Thus, the summary guide provided by FTA on the matter clarifies a lot in the cases of transitional VAT. For more, refer full guide on FTA website.</span></p> <p style="text-align:justify"> </p>
LIABILITY FOR VAT IN ACTIVE CONTRACTS SIGNED PRIOR TO JAN 1, 2018