Sars boss warns vendors over 0.5% VAT increase

The South African Revenue Service (SARS) has issued a warning to vendors and consumers about the implications of the reversal of the planned 0.5% VAT rate increase. 

SARS Commissioner Edward Kieswetter noted that the decision by Finance Minister Enoch Godongwana to reverse the VAT increase, initially set to take effect on May 1, 2025, has significant practical implications for VAT vendors and consumers.

The warning comes after the Western Cape High Court’s full bench set aside the adopted 2025 Fiscal Framework and Revenue Proposals and suspended the implementation of the VAT increase from 15% to 15.5% recently.

The EFF and the DA had approached the court to have the VAT increase announcement by Godongwana as well as the adoption of the finance committees' report by both Houses set aside. 

Kieswetter said SARS will ensure the necessary adjustments are made to accommodate the change. 

"As the administrator of all national government tax measures, SARS will ensure that the necessary adjustments are made to accommodate this change," Kieswetter said.

Vendors that have not implemented the change in rate are expected to charge VAT at the rate of 15% and not 15.5% for relevant goods and services.

Vendors that have already implemented the rate change may need to adjust their systems accordingly and report and pay the VAT. If a vendor is unable to revert to the 15% rate due to complex system changes, they must report and account for supplies and purchases at the 15.5% rate until they can make the necessary system adjustments.

According to the commissioner, the VAT transactions that were charged at 15.5% must be reported in field 12 (for output tax) and field 18 (for input tax) of the VAT return. Adjustments in the form of refunds of the 0.5% rate to customers and from suppliers must equally be reported in fields 12 and 18, respectively.

The VAT return declarations made will be taken into consideration when verifications and/or audits on the affected VAT tax periods are conducted.

He said the VAT returns that are to be submitted will continue to calculate the VAT auto calculation using the 15% rate from tax periods or months commencing May 1, 2025.

Vendors that have already implemented both the rate changes and the zero-rating are encouraged to reverse those changes before May 1, 2025. 

Kieswetter said that SARS understands the complexity and confusion that has resulted from this process and will do its best to provide further clarity to create certainty of obligation for all vendors.

He added that reversing the VAT rate increase has caused uncertainty and confusion among vendors and consumers, and SARS is working to provide guidance and support to ensure a smooth transition.

Vendors have until May 15, 2025, to complete the necessary system adjustments and revert to the 15% VAT rate. SARS will monitor the implementation of the VAT reversal and work with vendors to ensure compliance.

The finance minister has since welcomed the court order reversing the VAT increase. However, he defended his initial Budget proposal.

Cape Times