The VAT is intended to be collected by registrants who will include VAT in their prices so that it is ultimately paid by the final consumer. A registrant is a producer or supplier of taxable goods and services who exceeds a given amount of annual taxable supplies of turnover or sales, called threshold requirement for registration.

Under the proposed legislation, a VAT registrant will remit to the Comptroller the difference between VAT collected from customers and VAT paid on acquiring business inputs. The VAT on inputs includes payments made on imports and other purchases used to make the taxable supply or sales. The registrant pays or claims the difference in input and output VAT because the VAT on inputs would have been paid to the tax administration already and is not considered a cost.

VAT will be charged on all goods imported (except those exempted by legislation) whether or not the importer is a VAT registrant.

The proposed VAT and Excise Tax legislations will repeal the General Consumption Tax (GCT), the Airline Ticket Tax and the Motor Vehicle Purchase Tax. The Customs Service Charge (CSC), Common External Tariff (CET), Environmental Levy (EVL) and all other taxes would be retained in keeping with our regional and international commitments.

The VAT as proposed will consist of a standard rate of fifteen percent (15%), a reduced rate for tourism ten percent (10%), and a rate of zero percent for certain goods and services. Therefore, consumers are likely to experience a reduction in the price of many items especially where the VAT would be lower than the GCT.

The following example shows the purchase and sale of a bed by a Company under the current GCT system compared to the proposed VAT System.

It is important to note that under the VAT system the company would only have to remit $65.63 (i.e, $253.13 less $187.50) to the comptroller of Inland Revenue since the import VAT of $187.50 would have been paid to Customs already. Furthermore, the bed is noticeably cheaper with VAT compared to GCT.

MAIN FEATURES OF THE VAT

• at the end of any period of 12 or fewer months the person made taxable supplies of at least $100,000 ( threshold);
  
• at the beginning of any period of 365 calendar days, there are reasonable grounds to expect that the total taxable supplies to be made in that period will exceed $100,000.

The proposed VAT legislation defines taxable activity as an activity:

• Carried on continuously or regularly by any person in Grenada whether or not for profit;
• The supply of taxable goods or services to another person for consideration.

The Comptroller of Inland Revenue will be authorized to register any person who is required to register and fails to do so. Registration in that case will take place with effect from the date on which the taxable person was required to register.

The proposed VAT legislation also makes provision for persons below the threshold of $100,000 per annum to voluntarily apply to the Comptroller of Inland Revenue for registration. The Comptroller may consider such applications only after 1 year of introducing the VAT.

Every registrant will be issued a Certificate of Registration. This Certificate must be located conspicuously at each location of business at which the registrant engages in a taxable activity.

When a VAT registrant ceases to carry on taxable activities, the registrant is required to inform the Comptroller of Inland Revenue. The Comptroller will cancel the registration once satisfied that the registrant is not carrying on a taxable activity or will not do so within 12 months from the date of cessation.

A business that has declining turnover below the threshold of $100,000 may also apply for deregistration. If the deregistration is approved, the Certificate of Registration must be surrendered to the Inland Revenue Department upon cancellation of the person’s registration.

Taxable Supplies

A supply of goods includes a sale of goods or a grant of the use or right to use goods, while a supply of services means anything which is not a supply of goods or money. The supply of goods and services occurs when:-

• An invoice for the supply is issued by the supplier
• All or part of the payment for the supply is received
• The earliest of the date on which the goods are delivered or made available
• The performance of the service is completed.

Zero Rated Supplies

• Basic medicine (List of products to be developed in consultation with the Ministry of Health and the Pharmaceutical Association)
• Agricultural inputs (List to be developed in consultation with the Ministry of Agriculture and applied to registered farmers only)
• Basic food items (List to be developed from the Price Control List)
• Exports
• Water (For residential use up to 2900 gals; for other uses standard rate would apply)
• Electricity services (For residential use up to 99 kwhr )

Exempt Supplies

• Agricultural output except products supplied to the food processing industry n Sale of land for agricultural purposes
• Financial Services
• Services provided by non-governmental organizations
• Medical and Veterinary Services
• Dental Services
• Educational Services
• Residential Rent.

Exempt Imports

• An unconditional gift of goods consigned to the State, if the Comptroller of Customs has written approval from the Permanent Secretary, Ministry of Finance
• Imports of gifts of goods by approved Non-Governmental Organizations (NGO) and Charitable Organizations as approved by Cabinet
• Approved projects under the Investment Act
• Imports by members of the Diplomatic Mission, Regional and International Organizations
• Government imports.