In classifying taxes using the tax base – the basis for assessing tax, taxes are classified as income tax, capital tax and consumption tax. Consumption tax is imposed on the consumption of goods and services. Consumption tax are usually described as Value Added Tax (VAT), Sales Tax (ST), Goods and Services Tax (GST), or simply Consumption Tax (CT).
In Nigeria, Value Added Tax (VAT) is administered by the Federal Inland Revenue Service (FIRS) at the rate of 5%, while most State Governments charge Consumption Tax at the rate of 5%. Hence, Tax Payers are expected to charge VAT at 5% and Consumption Tax at 5% on the same invoice for certain transactions. Transactions which VAT and Consumption Tax are charged include – food, drinks and services purchased from hotels, restaurants, event centres, etc. It is appropriate to state that Nigeria operates multiple rates for consumption tax or VAT – zero percent, five percent, and ten percent. The Federal Executive Council has approved an increase of the standard VAT rate from 5% to 7.2% to commence in 2020 after the National Assembly must have amended the VAT Act. The current VAT Act was enacted in 1993 and took effect from January 1, 1994. The VAT Act is therefore long overdue for change, and some of the provisions that require change or amendment include – threshold for VAT, defining offsetable input VAT for services, monthly filing of VAT returns, offences and penalties, etc.
Source: Insight Scoop