The Honorable Minister of Finance, Budget and National Planning on 3^rd February 2020 signed into law the Value Added Tax Act Modification Order 2020 (The Order). The Order contains a modification of the First Schedule of the Value Added Tax Act (VATA) containing the goods and services exempted from taxation under the VATA, extends the list of items included in the exemptions and interprets Part I and II of the First Schedule to the VATA in respect of Goods and Services exemption respectively.

Prior to the Finance Act 2019 and the Order, the VATA in Part I and II of its First Schedule merely listed the goods and services exempted from VAT. There was neither an interpretation of the items listed as exempted under the Act nor an interpretation of goods and services.

The Finance Act of 2019 made a few amendments to the VATA such as interpretation of a few words used by the VATA such as “commencement of business”, “goods” “basic food items”, “taxable supplies” and “services” and amendment of the First Schedule of the VATA to include locally manufactured sanitary towels and tampons, tuition relating to nursery, primary, secondary, and tertiary education as goods and services exempt from taxation under the VATA. The Order seeks to remove all forms of ambiguity from the Act by giving clear interpretations to the items in the Schedule to the VATA.

Significant Amendments made by the Order

• Interpretation of Goods Exempt:
• “basic food items” listed in the Part I of the First Schedule of the VATA to include additives, bread, cereals, cooking oils, culinary herbs, fish, flour and starch, fruits, live or raw meat and poultry, milk, nuts, pulses, roots, salts except industrial salt, vegetables and water with the exception of those sold in hotels, eateries, restaurants, lounges or sold by contractors, caterers etc.

• “baby products” to mean products produced for the use of babies from birth to 36 months (3 years), including sanitary wears such as diapers. The Order also includes raw materials used in making sanitary towels and diapers as items exempted from taxation.

• “Educational books” and “Educational materials” to include both physical and electronic books and materials used in educational institutions whether formal or informal.

• expansion of Part I of the First Schedule to include and interpret locally produced agricultural and veterinary medicine, locally produced animal feeds.

• “pharmaceutical products” to refer to components and finished products of both modern and traditional medicine intended for human use in diagnosis, treatment and cure of diseases.

• “medical products” and “medical equipment” interpreted to exclude cosmetology or fitness devices or other similar devices from exemption under the VATA

• other items in Part I of the First Schedule such as: equipment, downstream gas utilization, farming machinery and farming transportation equipment, fertilizers, plant, purchase.

• Interpretation of Services Exempt:
• “medical services” excludes cosmetology, spa, gymnasium, and similar services.

• “shared passenger road-transport service” as an exempted service and interprets it as such available for use by the general public and excludes hired vehicles or transportation apparatus for private use. This suggests that VAT will be paid on private rides such as Uber, Taxify or similar rides with other hired vehicles for private use.

• “lease and rental of residential accommodation” by individuals from taxation. As such, lease and rental of residential accommodation by corporations is not exempted.

• Inclusion of a list of goods and services with identification codes under the following categories of exempted goods and services:
  • Medical and Pharmaceutical Products containing
  • Basic food items
  • Book and educational materials
  • Baby products
  • Plant, machinery and equipment purchased for utilization of gas in downstream petroleum
  • Petroleum products with 15 items including Aviation Spirit, Motor Spirit (super), Motor Spirit (ordinary), Kerosene (type jet fuel), kerosene, Natural Gas, other Liquefied Petroleum Gases & Gaseous hydrocarbons.
  • fertilizer, locally produced agricultural and veterinary medicine, and farming machinery & equipment
  • essential raw materials to produce pharmaceutical products
  • introduction of renewable energy equipment (recommendations) to the list of vat exempted items.
  • raw materials to produce baby diapers and sanitary towels.

Goods and services with their codes that fall under any of the listed categories in Paragraph 3 above are automatically exempted from taxation under the VATA.

For more on this, kindly send an email to uchechi@tonbofa.com