With the introduction of Act 870 however, the scope of VAT was extended to cover all financial services rendered by banks for a fee commission, or a similar charge.
Almost three months after the implementation of VAT on financial services, with emphasis on implementation of the tax on qualifying services provided by the banking sector, the GRA held a seminar on 19 March 2015 to discuss this tax following the filing of the January 2015 VAT and National Health Insurance Levy (NHIL) returns. VAT in this document loosely means VAT & NHIL.
Providers of fee based financial services (emphasis on banks), as a result, are required to register and charge VAT on the qualifying services. The GRA indicated during the seminar
that banks that failed to register for the tax will be registered and notified accordingly. With the responsibility to charge VAT by the banks comes the ability to claim a portion of the VAT incurred. Banks are entitled to deduct input VAT incurred in providing the taxable services and other VAT registered persons are entitled to deduct the VAT charged by the banks on financial services, subject to the general VAT deductibility rules.
But, rather unexpectedly, the GRA is in public issuing warning to rural banks in the Volta Region over the non-payment of Value Added Tax (VAT) charged on financial services rendered to their clients.
GRA claimed that, investigations by the Medium Taxpayers Office indicated that a good number of active rural banks in the Region were not complying with the VAT Act 2013 (Act 870) and warned that the Authority could “descend heavily” on the banks soon.
Many Ghanaians have registered their reservations and asking, whether the public pronouncement and warning was necessary at all?
It is a punishable offence for the banks and other institutions collecting VAT on behalf of the GRA to keep the returns for more than six months without transferring or filing it with the GRA.
Mr Roger Kumah, the Head of Medium Taxpayers Office of the Ghana Revenue Authority (GRA), made this known in Ho last week, advised the banks to put systems in place to track financial services that fell under the VAT Law and pay that element to the Authority to avoid being surcharged by the Authority.
However, attempts to seek clarification proved futile. We are therefore publishing to demand answers to the following questions from the relevant institutions: Whose duty is it to ensure that, tax payers are comply with the state laws? Who is to be blamed in this case?
In the case of the rural banks not paying VAT on their taxable services to GRA, are the banks charging it on services rendered to clients and refusing to transfer the monies to GRA or they are not charging at all?
GRA must come out clear on the reasons given by the banks which are not filing the VAT on services to the Authority.
Mr Kumah while addressing a tax education seminar in Ho, on Wednesday, after series of road sessions aimed at “empowering taxpayers for voluntary compliance.”
He said the new VAT Act was friendly and urged the citizenry to get familiarised with it and comply with the provisions. The participants were taken through the VAT Act 2013 (Act 870) and Income Tax Act 2015 (Act 896).
Act 870, from a bank’s perspective, only allows a deduction for input VAT that is directly attributable to the provision of fee based financial services. In effect, banks are not permitted under Act 870 to apportion total input VAT incurred on all operations between taxable and exempt supplies. The GRA reiterated this provision, going on to further hint that only VAT incurred exclusively for the provision of taxable services will be allowed.
But, from a registered person’s perspective, Act 870, requires one to be in possession of a tax invoice as a prerequisite to claim input VAT. Historically, evidence of bank charges have been debits on the bank statements. However, the GRA has said that a debit on a bank statement will not suffice as a sufficient basis for deducting input VAT incurred.
Businesses will need to take the proactive step to enter into suitable invoicing arrangements with their bankers in order to claim the input VAT.
In any case, the GRA requires banks to comply with the provision to issue the
Commissioner—General’s approved invoices for taxable supplies.
The GRA explains that, the takeaway Banks and other providers of taxable financial services are to keep track of costs incurred to provide taxable services in order to deduct qualifying input VAT. Also, businesses that incur VAT on financial services should consider making invoicing arrangements with their bankers in order to be able to deduct the input VAT incurred.
-Adnan Adams Mohammed
