Value Added Tax

Introduction

Value Added Tax(VAT)  is a form of taxation that is part of the government fiscal policy. it is a comprehensive tax that is a levied on virtually all goods and service with a few exceptions. VAT is an indirect come into effect on 30 September 1991.

The current VAT rate is 15%. 

The learners will list 3 items on zero rated and standard VAT 

These are the examples I will make use of to differentia 

VAT zero rated  

Standard VAT 
refers to items that are taxable, but the rate of tax is nil on their input supplies. 

The government doesn’t tax its retail sale but allows credits for the value-added tax (VAT) paid on inputs. This reduces the price of a good.

Governments commonly use zero-rated goods to lower the tax burden on low-income households by zero-rating essential goods.

Examples: 

  • Brown bread 
  • Maize meal 
  • Pilchard in tin 
  • Milk powder 

 

 

 

 

 

 

– is a transaction or event on which you have to pay output tax, even if you haven’t actually sold any goods or services. The transaction or event is regarded as a taxable supply. 

Examples: 

  • Soft drinks 
  • Ice cream 
  • Alcoholic drink 
  • Other goods and services  

 

 

 

 

 

 

 

 

 

 

  Explain how to calculate price including vat and excluding vat

Task

                                                                           Activity 

  1. what does VAT stand for and what is the current VAT rate?
  2. when was VAT introduced in South Africa? 
  3. calculate the price inclusive VAT . when given R305 of price exclusive VAT using the two step approach
  4. fill in the table below using the one step approach 
VAT Exclusive VAT  Inclusive VAT
R10 a) b)
c) R250 d)
e) f) R1500

 

Process

HOW TO CALCULATE PRICE INCLUSIVE OF VAT FRON THE PRICE EXCLUSIVE VAT USING THE TWO STEP METHOD 

VAT + Price exclusive= Price inclusive

In such cases you are required to calculate price inclusive VAT from price exclusive VAT

Step 1: calculate the VAT from the price exclusive VAT using the formula 

VAT= Price exclusive VAT x15%

Step 2: calculate the price inclusive VAT by adding VAT calculated in step 1 to the price exclusive 

Price Inclusive VAT= VAT+ Price Inclusive VAT

                                                                                    EXAMPLE 1

Calculate the Price inclusive VAT. When given R200 of price exclusive VAT. use the two way approach. 

Step 1: R200 x 15%

VAT = R30

Step 2: R200+R30

price Inclusive VAT= R230

 

The one step approach 

Calculate the price inclusive VAT directly from the price exclusive VAT 

price incl VAT = price excl VAT x (15+100)/100

Calculate the VAT  amount directly from price inclusive VAT

VAT = price incl VAT x 15/115

calculate price exclusive VAT directly from VAT amount 

exclusive VAT= VAT x 100/15

 

how to calculate the zero rated items 

Amount x 0%

=R0.00

 

Evaluation

Question 1   2 Marks 
Question 2 1 Mark 
Question 3 4 Marks
Question 4 12 Marks

Total Marks                   19 Marks 

Conclusion

I will ask learners to ask questions based on what I taught in class. Than will summarize in what they asked.

The learners are asking questions and taking notes and listening at the same time.

We will mark the class activity with the class

Credits

https://www.newerapublishers.co.za/wp-content/uploads/2019/04/Mod-7-VAT-Learner.pdf

Textbook: ENJOY Accounting Grade 10 teachers & learners book 

Textbook: Study Master Accounting Grade 10 learners book 

PowerPoint by Mr. SA Manangana

 

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