The Advertising Regulatory Board (ARB) has dealt with two advertising cases which misled consumers about the total prices of products as they failed to include VAT.
According to Varusha Moodaley, a senior associate at Cliffe Dekker Hofmeyr, the first complaint was lodged against a travel website on the basis that a holiday adventure package advertised on the website only listed the VAT exclusive price.
In the second complaint lodged against a supplier of office furniture, the complaint was in respect of the advertising of office chairs reflecting only the VAT exclusive price.
“Section 65 of the VAT Act requires that all prices advertised or quoted in respect of a taxable supply of goods or services must include VAT, or alternatively, that the advertisement or quotation must reflect the VAT cost, the VAT exclusive price and the VAT inclusive price,” said Moodaley.
“Section 65 goes on to require that where an advertisement reflects the VAT inclusive and VAT exclusive price, both prices must be displayed with equal prominence and impact.”
She added that in terms of the VAT Act, all price tags, catalogues, advertisements and quotations, must, as a matter of course, include the VAT payable in respect of the supply.
Does this apply in all cases?
Moodaley said that price tags displayed on goods in-store do not need to contain a ‘VAT-inclusive’ statement – provided that this fact is prominently displayed at all entrances to the premises in which the business is carried on, and at all pay points where payments are made.
“Section 65 also gives the commissioner for SARS the authority to approve any other method of displaying prices where he deems necessary,” she said.
“In this regard, the commissioner has directed that an electronic services supplier may advertise or quote the price of its electronic services exclusive of VAT, if it has a statement on its website indicating that VAT will be levied on supplies of electronic services to an electronic services recipient as contemplated in the VAT Act.”
Moodaley said that while the Advertising Regulatory Board cannot fine these advertisers for breaking the advertising code, it is a criminal offence not to reflect the VAT inclusive amount in terms of s65 of the VAT Act.
“Although a seemingly simple requirement of the VAT Act, many vendors nevertheless find themselves in contravention of the requirements of s65 of the VAT Act, whether intentionally or not, as evidenced by these recent ARB decisions,” she said.
“Even though suppliers may be tempted to a adopt a marketing strategy aimed at luring potential customers by means of displaying the lower VAT exclusive price; vendors are reminded, as discussed above, that it is a criminal offence not to reflect the VAT inclusive amount when advertising or quoting prices in respect of its supplies.
“Suppliers should accordingly carefully review their advertisements and quotations to ensure compliance with the VAT Act,” Moodaley said.