Rye, low GI bread to be removed from VAT exempted goods

HOUSEHOLDS who consume finer items of the food basket like rye and low GI bread will from 1 April need to dig deeper into their pockets. National Treasury has proposed that the VAT Act be amended to exclude low GI and rye bread, which is usually consumed by wealthier individuals, to be removed from VAT exempted goods.

South Africa’s VAT system includes 19 basic food items that are zero-rated. These include dried beans, samp, maize meal and rice. This system remains in place.

“Recently, for example, there has been uncertainty around zero-rating brown bread. The 19 zero-rated food items are only meant to cover basic food items. As of 1 April 2018, government proposes to amend the VAT Act (1991) to reflect the original policy intent – that only brown bread and whole wheat brown bread will be zero-rated. Products such as rye or low GI bread, which in South Africa are much more expensive and tend to be consumed by richer households, will not be zero-rated,” National Treasury said.

Read also: Smokers, drinkers to feel the pinch-Budget 2018

Meanwhile, Finance Minister Malusi Gigaba said that in addition to VAT, new proposals will see an increase on duties for luxury goods.

“In addition to VAT, we are increasing excise duties on luxury goods and estate duty on wealthy individuals,” he said when tabling his Budget Speech on Wednesday.

In its budget review document, Treasury said a less complex means of applying higher taxes to luxury goods is to increase ad valorem excise duties.

Read also: 5 highlights from today’s budget speech

“Government proposes to increase these rates, which are already applied to some goods that are consumed mainly by wealthier households, such as cosmetics, electronics and golf balls. The associated revenue-raising potential is not significant but it is aligned with the progressive structure of the tax system.”

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