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VALUE-ADDED TAX (VAT) Hilda Groceries is registered for VAT - NSC Accounting - Question 1 - 2021 - Paper 2
Question 1
VALUE-ADDED TAX (VAT) Hilda Groceries is registered for VAT. The standard VAT rate is 15% and is applied on most products. REQUIRED: 1.1.1 Implementation of VAT: ... show full transcript
Worked Solution & Example Answer:VALUE-ADDED TAX (VAT) Hilda Groceries is registered for VAT - NSC Accounting - Question 1 - 2021 - Paper 2
Step 1
Explain why the government implemented VAT in South Africa. State ONE point.
Answer
The government implemented VAT in South Africa as an additional source of revenue, which is crucial for funding public services and infrastructure. It allows for more regular income compared to other tax forms.
Step 2
Explain why some products are zero-rated products. State ONE point.
Answer
Some products are zero-rated to make basic necessities more affordable for individuals and families in need. This helps to promote access to essential goods, like food items, which are considered of utmost importance.
Step 3
Calculate the amount payable to SARS in respect of VAT for the two months ended 30 April 2021.
Answer
To find the amount payable to SARS, calculate the output VAT and the input VAT:
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Output VAT:
- Total Sales = R412,000
- Output VAT = 15% of R412,000 = R61,800
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Input VAT:
- Purchases of Trading Stock = R230,000
- Input VAT = 15% of R230,000 = R34,500
- Goods returned by customers = R19,320, calculate Input VAT = 15% of R19,320 = R2,898
- Bad Debts Recovered = R140, Input VAT = 15% of R140 = R21
- Stock Return by Owner = R1,380, Input VAT = 15% of R1,380 = R207
- Total Input VAT = R34,500 + R2,898 + R21 + R207 = R37,626
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Finally, the net VAT Payable = Output VAT - Input VAT = R61,800 - R37,626 = R24,174.