The Federal Government has introduced a new bill aimed at exempting various essential products and services from Value Added Tax.
The proposed VAT exemption list includes baby products, locally manufactured sanitary towels, pads, and tampons, aiming to enhance accessibility to these essential items.
The bill, titled “A Bill for an Act to Repeal Certain Acts on Taxation and Consolidate the Legal Frameworks relating to Taxation and Enact the Nigeria Tax Act to Provide for Taxation of Income, Transactions and Instruments, and Related Matters,” was dated October 4, 2024, ” according to Nairametrics.
The bill document listed the items exempted from the Value Added Tax imposed to include “Baby products; locally manufactured sanitary towels, pads or tampons.”
In addition to baby products and sanitary items, the bill extends VAT exemptions to various categories across both economic and social sectors.
This broader scope includes essential goods and services such as healthcare supplies, educational materials, and possibly public transportation.
The bill also includes exemptions for military hardware, arms, ammunition, and locally manufactured uniforms supplied to the armed forces and security agencies.
Additionally, shared passenger road transport services will be exempt from VAT, aiming to reduce transportation costs for the public.
In the agricultural sector, VAT relief is offered on the purchase, hire, or lease of equipment like tractors and ploughs, provided they are used for agricultural purposes.
However, individuals in agriculture must initially pay the VAT and can later request a refund from tax authorities.
The proposed law also includes exemptions for diplomatic and educational activities. Goods and services supplied to diplomatic missions and diplomats, as well as entities under the Diplomatic Immunities and Privileges Act, are exempt as long as they are not for profit.
Educational institutions are similarly exempt for plays and performances conducted as part of their learning processes.
Additionally, the bill highlights exemptions for government licenses, land and buildings, and financial instruments, including money and securities. Supplies used within export processing or free trade zones will also be exempt from VAT, provided they are utilized for approved activities.
The bill stipulates that VAT will only be collected on exempted items if the Minister issues an order published in the Official Gazette, specifying a date for reintroducing VAT.
This provision indicates that while the initial exemptions are intended to relieve financial burdens, the government retains the flexibility to modify these rules in the future.
This adaptability allows for adjustments based on changing economic conditions or policy priorities, ensuring that the government can respond effectively to emerging needs.
It was observed that this was not the first time the government is introducing VAT exemptions on some of the items on the list.
In the Finance Act of 2020, about 20 basic food items, locally manufactured sanitary towels, pads and tuition fees relating to nursery, primary, secondary and tertiary education were added to the exemption list of goods and services for VAT.
