VAT (Value Added Tax) is a tax levied on the added value of products and services at each stage of the manufacturing and distribution process. It is included in the final price paid by the consumer for goods or services. It is known as the ‘Goods and Services Tax’ or GST in various nations.
In this article, we are taking a look at how you can calculate your own VAT.
Taxable Value for Charging VAT
- the value of the supply (goods or services), including chargeable levies but excluding deductible VAT, is used to calculate VAT.
- Before computing the VAT, all levies that CANNOT be removed should be incorporated into the cost building (i.e. recognized as costs) and added to the base.
- The COVID-19 HRL 1 percent, 2.5 percent NHIL, and 2.5 percent GETFund are calculated on the value of the taxable supply, which includes all costs incurred excluding deductible VAT.
- The 12.5 percent VAT is calculated on the taxable supply’s NHIL, GETFund, and COVID-19 HRL charged inclusive value.
- In a financial statement, these expenditures (levies and taxes) can be deducted as expenses.
How To Calculate VAT
the following are practical examples of how VAT is calculated.,
iLLUSTRATION
(12.5%) (1.06) = (0.125 1.06) = 0.1325
1.1925 1.1925 1.1925
then multiply both the numerator and the denominator by 10,000 to remove the decimals = 0.1325 * 10000 = 1325
1.1925*10000 11925
To reduce to the lowest fraction, divide both the numerator and the denominator by 25
= 1325 / 25 = 53
11925/25 477
VAT fraction = 53/477
Illustration
Dzolali Limited is a VAT registered textile manufacturing company approved by the Ministry responsible for Trade and Industry. The company made an all-inclusive tax payable of GH¢94,340.00 for the month of May, 2021.
Compute the relevant NHIL Levy tax payable.
Tax computation – VAT
VAT Fraction = 53/477
GH¢94,340.00 (excluding the tax)
53 *106,132.50 (including the tax) = GH¢ 11,792.50
477
Total VAT Payable = GH¢ 11,792.50
Taxpayers must file returns and make payments by the last working day of the month following the month for which the returns are filed. For example, MAY returns must be submitted by the end of JUNE’s working day. If payment is needed on the returns that have been submitted, it must be made no later than the date that the return has been submitted.
The return must be completed on the Commissioner General’s form. You can get a copy of the tax return form by clicking here. www.gra.gov.gh.
The following returns will be submitted by the VAT registered taxpayer
• A VAT returns for standard rates supplies
• A VAT flat rate scheme (VFRS) Returns for (VFRS Taxpayer only)
• A NHIL, GETFund, and COVID-19 HRL Return.