Comments to answers

Hi,
Do we charge VAT on generator sales?

In Kenya VAT is charged based on the following rates

✓ Standard rated at 16%

✓ Standard rate (fuel) at 8%

✓ Zero rated at 0%

✓ Exempt - no vat rate applies

The VAT Act 2013 has comprehensive lists of exempt supplies and zero rated supplies referred to as SCHEDULES. These schedules are named the FIRST SCHEDULE and SECOND SCHEDULE respectively.

To determine where an item or service falls and hence it's rate of tax the procedure is as follows:

✓ Scan the First Schedule for exempt supplies

✓ Scan the Second Schedule for zero rated supplies

For those items that are not listed in the above two categories (schedules) automatically default to the 16% rate except for fuel at 8%.


SUPPLY OF GENERATORS

This is standard rated at 16%. However if supplied to an exempt or zero rated body or project listed in the two schedules above then the applicable rate will be exempt (no charge) or zero rated (0%.


EXEMPT AND ZERO RATED SUPPLIES

With zero rated supplies any input tax suffered in the course of business is claimable and offset against output tax on sales.

On the other hand this is not the case with exempt supplies. Any input tax attributable to the exempt supplies is not allowable against output tax on sales. Hence the only way to recover the same is by factoring it in the price of the product or service. Hence may result with higher prices.


MIXED SUPPLIES

Where a person makes both exempt and vatable supplies (mixed supplies)and taxable supplies are more than 90% of total supplies (sales) ALL input tax is recoverable.