The Goods and Services Tax (GST) rate will be pegged at 16 per cent on all imported goods into Zambia, while the rate on domestic services supplied within the country will be nine per cent.
According to the Sales Tax Bill, 2019, the GST rate on imported goods into Zambia will be at 16 per cent, while the rate on domestic goods and services supplied within the country will be at nine per cent.
Last Friday, government decided to push back its proposed implementation of Sales Tax from April 1 to July 1, 2019.
Finance Minister Margaret Mwanakatwe had told Parliament last Friday that the draft Bill had been concluded and would be presented to the House for first reading by Tuesday April 2, 2019.
She further said the Bill was intended to be finalized during the June parliamentary session.
This means that government is set to abolish Value Added Tax (VAT), whose rate is also currently at 16 per cent, with some items being exempted or zero-rated, and replace it with the newly-proposed non-refundable Sales Tax on July 1.
And according to the draft Bill, the Sales Tax rate on imported goods and services into Zambia is proposed to be at 16 per cent, while the rate on domestic goods and services supplied within the country will be nine per cent.
“Tax on a taxable supply shall be charged on the taxable value at the rate of (a) nine per cent in the case of goods and services supplied within the Republic; and (b) sixteen per cent in the case of imported goods and services,” the Bill reads.
It, however, stated that despite the proposed rate, Mwanakatwe could still prescribe a lower tax rate of both thresholds.
“Despite subsection (1), the Minister may, by Statutory Instrument, prescribe a lower rate of tax in respect of a taxable supply,” it stated.
It also stipulates that Mwanakatwe has powers to exempt certain goods from being deemed taxable under the Act.
“The Minister, may by Statutory Instrument exempt from tax – (a) capital goods; (b) inputs; (c) designated basic and essential goods or services; (d) designated supplies to privileged persons; or (e) exports,” it reads.
Details of which services will be deemed taxable by service providers are also contained in the Bill.
“A service shall be regarded, as a taxable supply in the Republic if the supplier of that service – (a) has a place of business in the Republic and no place of business elsewhere; (b) does not have a place of business in the Republic and elsewhere, but the supplier’s usual place of residence is in the Republic; (c) has a place of business most directly concerned with the supply of the services in question is the one in the Republic; or (d) imports the services, which are performed,” it stated.
Erring offenders who fail to comply with payment of Sales Tax could also face similar penalties as under the current VAT system.
“32. (1) Where a tax due from a taxable supplier remains unpaid, an authorised officer may, under a warrant issued by the Commissioner-General, levy distress on the goods and chattels of the supplier. (2) The authorised officer executing the warrant, with a police officer or other assistants, that the authorised officer considers necessary, may, at any time between sunrise and sunset, break open any premises of the supplier,” it cautions.
“Goods and chattels on which distress has been levied under this section shall be kept for ten days either at the premises at which distress was levied or at another place that the authorised officer executing the warrant may consider appropriate, at the cost of the supplier. If the supplier does not pay the tax due under this Act, together with any costs under subsection (3), the goods and chattels shall be sold by public auction by sealed tenders or bids.”
Since delivering her 2019 national budget speech in Parliament last September, Mwanakatwe has consistently maintained that government was determined to implement Sales Tax initially on April 1, 2019, but now on July 1, 2019, despite stiff opposition.
She has insisted that implementing the GST was a path of “best practice” to eliminate the “unsustainable and laborious process of VAT refunds.”
But a cross-section of stakeholders have warned government against implementing the controversial Sales Tax for a myriad of reasons ranging from its cascading effect on the pricing of essential goods and services to the negative impact on Zambia’s annual rate of inflation.