General Consumption Tax PDF

Advanced Taxation General Consumption Tax  Presentation Outline 1. Apply the following concepts to the computation of GCT: a) Taxable supplies b) Exempt supplies c) Standard rated d) Zero rated supplies e) Input tax f) Output tax 2. Prepare the GCT retu...

Advanced Taxation General Consumption Tax  Presentation Outline 1. Apply the following concepts to the computation of GCT: a) Taxable supplies b) Exempt supplies c) Standard rated d) Zero rated supplies e) Input tax f) Output tax 2. Prepare the GCT returns for businesses  General Consumption Tax General Consumption Tax (GCT) This is a tax on sales paid by the consumer and collected and remitted by the seller. It can be seen as a value-added tax where tax is paid at successive stages and recovered by the intermediate taxpayers and the cumulative tax is borne by the final consumer. Arguments for GCT Persons will find it more difficult to evade a sales tax as they must spend their earnings. A sales tax is much easier to collect and monitor. It provide a large source of income for the government.  General Consumption Tax Registration The GCT Act provides for the registration of any person carrying on a taxable activity. A registered person is anyone involved in a taxable activity, whereas a registered taxpayer is those persons whose sales exceed ten million per annum. A registration certificate is issued with the person’s unique number (TRN) and this should be displayed in open view of all his customers.  General Consumption Tax Obligations of Registered Taxpayer Issue tax invoices Collect the appropriate tax in respect of the goods and services which he supplies. Keep proper books and records and produce them, if required by an authorized person and provide any other information as may be required. Make regular returns on the prescribed form whether or not he makes a taxable supply during the tax period. Pay over the amount of tax payable in respect of the taxable period to which the return relates. Advise the tax authorities in writing of a request for a cancellation, change in ownership or business address. File a final return for the last taxable period – upon closing a taxable operation.  General Consumption Tax Taxable Activity An activity carried on in the form of a business, trade, profession, vocation, association or club and which is carried on continuously or regularly by any person, whether or not for a profit and involves or is intended to involve, the sale or supply of goods and services to any other person for a consideration. Taxable Supply A supply of goods and services made in the course of, or furtherance of, any business that is not exempt from GCT by law. Exports are subject to tax at a rate of zero percent  General Consumption Tax Taxable Supply A taxable supply takes place when whichever of the below occurs first: 1. The invoice for the supply is issued, 2. Payment is made for the supply, 3. The goods are made available or the services are rendered. Under a hire purchase arrangement, or when there is an agreement that the recipient has an option to return the goods to the supplier, the supply takes place when the goods are made available to the recipient.  General Consumption Tax Tax Rates The GCT standard rate was 16.5 percent and now 15% as at 1st April 2020. As with the Income Tax Act there are exceptions and variations. For example, the rate for telecommunication services, including cards for cell phones is 20 percent Zero-rated supply A GCT registered business making zero-rated supplies will charge GCT at 0% on the selling price. Technically, there is no GCT charged on the invoice, no GCT will be collected from the customer and remitted to the collectorate of Taxes. However, A GCT registered business is entitled to claim a credit on input GCT incurred in the making of zero-rated supplies.  General Consumption Tax Exempt supply An exempt supply is a sale of good or delivery of service which is not taxable, no GCT is charged on such supply. Exempt supplies do not open any deduction right. Businesses that exclusively make exempt supplies should not be registered. Input Tax This is tax charged on the supply of goods and services made to the registered taxpayer or on the importation into Jamaica of goods and services required wholly or mainly for the purpose of making a taxable supply.  General Consumption Tax Discount on invoices Any discount must be written off before the GCT is calculated. Output Tax This is tax related to all sales that the registered taxpayer has made. Goods Returned If goods are return by the taxpayer than this would be calculated as part of the output tax If goods are return to the taxpayer this is calculated as part of the input tax.  General Consumption Tax Bad Debts Bad debt when written off are expenses, therefore debited in the GCT account. Bad debt recovered is credited in the GCT account. Goods for personal use and gifts The GCT Act requires that the details be recorded and the appropriate GCT should be charged. Special Consumption Tax (SCT) Section 9 of the Act deal with the imposition of a special consumption tax on prescribed goods. This is at a different rate as the standard rate and is goods such as petroleum products, tobacco and alcoholic beverages. Questions & Answers THE END