INPUT VAT should be claimed within the tax period by a registered operator who is required to furnish a return, but not longer than 12 months from that date.
The law further grants the Commissioner discretionary power to either accept or decline a tax invoice that would have been submitted after the 12 months prescribed period, should there be reasonable grounds for failing to claim the input tax within this period.
The Finance Bill, which is yet to be gazetted into law, however seeks to remove the Commissioner’s discretionary powers and to that end a fiscal tax invoice that is not claimed within the 12 months period will not be claimable any more no matter the circumstances.
Input tax is the VAT charged by the VAT registered supplier on the operator’s business purchases, for example on goods purchased for resale, raw materials, capital goods equipment etc.
These goods or services must be acquired for purposes of producing taxable supplies to qualify for an input tax deduction.
To claim the input tax, a registered operator must be in possession of a valid fiscal tax invoice.
This is an invoice supplied by a registered operator within 30 days from the date of supply.
In the past, the law stated that a VAT input tax claim will only be allowed when a tax invoice contained all the requirements that the revenue authorities would have prescribed for it to have and all this done within the period the registered operator is required to furnish the return or 12 months from the date of invoice, whichever is longer period. Input tax is only deductible to the extent that it is incurred for the purposes of consumption, use or supply, in the course of making taxable supplies.
The phrase “whichever is the longer period”, clearly portrays how registered operators have been granted much leeway to enable them to claim back their input money on their supplies.
There is need therefore, for the VAT registered operators to submit their claims for input tax on time so that they do not find themselves disadvantaged by the law.
The position seeks to imply that every registered operator must claim input tax on the fiscal invoices not later than 12 months from the date of the underlying supply. To cut to the chase, valid fiscal tax invoices are a prerequisite for claiming input tax.
Earlier this year, the government amended the law to repeal the claiming of input tax through the use of a tax invoice and only invoices that are issued through a fiscal gadget or device known as fiscal tax invoices shall be used for this purpose.
The last day for claiming input tax based on a tax invoice was then fixed as at March 31 2022, for tax invoices issued prior to January 1, 2022.
The new law, it appears, seeks to remove the conflict with the old one, which banned the claiming of tax invoices issued on or before December 31, 2021.
If this ban had not been affected it would have been possible to claim these invoices.
With the new prescribed law, it means that an operator is barred from claiming input tax after the 12 months period.
The Commissioner shall not have any power to be lenient and grant a longer window period after the 12 months have lapsed.
While there may be genuine reasons why one could not have claimed other than the mere oversight, the law no longer provides leeway no matter the circumstances.
The law therefore, strips the Commissioner of this role to promote appropriate compliance in the submission of the invoices.
This then comes off as a warning to operators to put their houses in order so that they do not find themselves on the losing side when it’s time to claim input tax.
It’s quite unfortunate for one to be disadvantaged by their own deeds.
Generally, the law is clear on one thing, which is the point that all submissions must not be submitted after the confines of the prescribed time.
The discretion must have been beneficial to the taxpayer, nonetheless, this new law will influence compliance since taxpayers will not gamble on whether or not the Commissioner will be lenient and exercise the discretion to allow a late submission.
Tapera is the founder of Tax Matrix (Pvt) Ltd and the chief executive of Matrix Tax School. He writes in his personal capacity.