GCT

Advanced Taxation: General Consumption Tax (GCT)

• GCT is a tax on consumer sales collected and remitted by the seller.
• It operates as a value-added tax, with tax collected at each stage of production, and the final consumer bearing the cumulative tax.
• Arguments for GCT include its difficulty to evade (as individuals must spend their earnings), ease of collection and monitoring, and large income generation for the government.

Presentation Outline

• GCT Computation: The presentation outlines applying specific concepts to GCT calculation: taxable supplies, exempt supplies, standard-rated, zero-rated supplies, input tax, and output tax.
• GCT Returns: The second major component of the outline is preparing GCT returns for businesses.

GCT Registration

• The GCT Act mandates registration for individuals engaged in taxable activities.
• A registered person is anyone involved in a taxable activity, while a registered taxpayer is someone whose annual sales exceed $10 million.
• Registration results in a certificate including a unique number (TRN) displayed prominently.

Obligations of Registered Taxpayers

• Issue tax invoices detailing goods and services supplied.
• Collect appropriate taxes for those goods and services.
• Maintain proper books and records, and provide relevant information when requested.
• Provide regular returns (even if no taxable supply).
• Pay taxes in accordance with the taxable period to which returns relate.
• Inform tax authorities of changes (e.g., cancellation, ownership).
• Complete a final return upon closing a taxable operation.

Taxable Activity

• Defined as continuing business, trade, profession, vocation, association, or club activities involving the sale or supply of goods or services to other people for remuneration.

Taxable Supply

• This refers to goods or services supplied as part of a business activity, not exempt from GCT.
• Exports are zero-rated.
• A taxable supply occurs when either an invoice is issued, payment is received for the supply, or the goods/services are made available to the recipient. Hire-purchase arrangements are included.

Tax Rates

• The standard rate for GCT was 16.5%, but is now 15% as of April 1st, 2020.
• Some services, notably telecommunication services (e.g., cell phone cards) are subject to a different rate of 20%.
• There are other exceptions regarding GCT rates.

Zero-Rated Supply

• Businesses providing Goods on a zero-rated basis charge no GCT tax on the sale.
• However, businesses are eligible for a credit for the input GCT on the making of the zero-rated supplies when completing their tax returns.

Exempt Supply

• These are sales of goods or service not subject to GCT.
• No deduction rights are permitted on exempt supplies.
• Companies that provide only exempt supplies are not required to register.

Input Tax

• Tax charged on goods/services supplied to the registered taxpayer or goods imported into the country.
• This input tax applies when the goods/services are needed to create a taxable supply.

Discount on Invoices

• Discounts on invoices should be deducted before calculating GCT.

Output Tax

• This is GCT related to all sales made by a registered taxpayer.

Goods Returned

• Returned goods are considered as part of output tax when the return is by the taxpayer.
• When a return occurs for the original buyer, it becomes an input tax.

Bad Debts

• Bad debts written off are considered expenses and debited to the GCT account.
• Recoveries of bad debts are added to the GCT account.

Special Consumption Tax (SCT)

• A special consumption tax for particular products.
• Applies to certain specific goods and services, such as specific petrochemical products, alcohol, tobacco, and other goods at a different rate than the standard GCT rate.