Many vendors all-too-often forget that standard-rated ingredients are added to a zero-rated product, this will change the supply's nature.
This means that they'll have to charge VAT at the standard rate on the supply, despite the fact that the primary ingredient is zero-rated.
Selling a pack of plain fresh vegetables will be zero-rated.
But if you add, let's say flavoured butter, then the supply will be at the standard rate.
Another example could be if you flavour rice to make a peri-peri rice. The rice itself is xero-rated, but the rice with the added flavouring will be standard-rated.
Many forget that if you sell zero-rated foodstuffs as a meal which prepared and ready to consume immediately, such as takeaways or convenience food, you must charge VAT at the standard rate of 14%.
A shop sells potatoes which are already prepared for consumption, with added spices and butter. So even though potatoes are, in themselves, zero-rated, the shop will have to sell them at the standard rate of 14%.
Another example could be fresh and frozen fruit. This is zero-rated. But if you cut it up, and mix it together for sale as a 'fruit salad', then you'll have to charge VAT at the standard rate.
So those were 2 very common VAT mistakes when it comes to basic foodstuffs.
Avoid them and in so doing, avoid unnecessary additional tax
and penalties, courtesy of SARS.
To learn much more on what's subject to VAT, and what's not, simply page over to chapter T 03: Taxable Supplies
in your Practical VAT
Loose Leaf Service
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