Value-added tax (VAT) is a consumption tax on goods and services that is levied at each stage of the supply chain where value is added, from initial production to the point of sale.
Value Added Tax (VAT) Questions and Answers
Answers to worked example 1
- VAT charged by Trendy Suppliers on one dress. [3]
R285 ×14 = R35 (Remember: Inclusive is 14 ÷ 114)
114 - Selling price of one dress exclusive of VAT.
Cost price = R285 – R35 (VAT) = R250
Selling price = R250 × 140 = R350 (Remember: Mark up = 40% on cost price)[6]
100 - VAT charged to the customer on one dress:
Selling price = R350 (as calculated in No 2 above)
(Remember: Exclusive is 14 ÷ 100)
VAT charged = R350 × 14 = R49 [3]
100 - VAT charged by Trendy Suppliers on one pair of jeans:
R1803 × 14 = R25,20 [3] (Remember: Exclusive is 14 ÷ 100)
100 - Selling price of one pair of takkies inclusive of VAT:
Cost price = R110
Selling price = R110 × 140 = R154 (exclusive of VAT)
100
VAT = R154 × 14 = R21,56
100
VAT inclusive amount = R154 + R21,56 = R175,56 [9]
Worked example 2: Mizi Stores
Mizi Stores, owned by Mia Mizi, is registered for VAT.
Calculate the amount of VAT to be paid over to SARS for the period ending 28 February 2011. [17]
Information for this period ending 28 February 2011
- Total sales (cash and credit) (VAT inclusive) R60 000
- New computer bought (for office use) (VAT inclusive) R12 000
- Trading stock bought (VAT exclusive) R20 000
- Credit notes issued to customers (VAT inclusive) R 1 500
Answers to worked example 2
| VAT output | VAT input | |
| a) Total sales: 60 0003 × 14 114 |
R7 368,42 | |
| b) New computer bought: 12 000 × 14 114 |
R1 473,68 | |
| c) Trading stock bought: 20 0003 × 14 100 |
R2 800 | |
| d) Credit notes issued: 1 500 × 14 114 |
R184,21 | |
| R7 368,42 | R4 457,89 | |
| VAT payable to SARS: R7 368,423 − R4 457,893 = R2 910,53 Total VAT output – Total VAT input = VAT payable to SARS |
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