National Treasury has announced that it will set up a panel of experts to consider and review the country’s current list of items that have been zero-rated for VAT.
South Africa’s VAT rate will increase from 14% to 15% on 1 April, and this has raised concerns on how this will impact the most vulnerable in the country.
To ensure the VAT hike is not regressive, the current list of 19 items will remain zero-rated, Treasury said, with the panel of experts considering expanding the list.
“The panel will also consider how specific expenditure programmes can be improves to better target poor and low-income households (eg National School Nutrition Programme, food stamps, etc),” it said.
The panel is expected to deliver its first report by 30 June 2018, in time to be included in draft regulations being compiled in July 2018.
The current list of zero-rated food items includes:
- Brown bread
- Maize meal
- Mielie rice
- Dried mielies
- Dried beans
- Pilchards in tins
- Milk powder
- Dairy powder blend
- Vegetable oil
- Cultured milk
- Brown wheaten meal
- Edible legumes
Other goods and services that are currently zero-rated for VAT include illuminating paraffin and goods which are subject to the fuel levy (petrol and diesel), and well as certain government grants and education services.