Transitional period for supermarkets to dispose of old stocks urged

Monday, 24 December 2012 00:00 -     - {{hitsCtrl.values.hits}}

A call for supermarkets to be given a transitional period in the New Year to dispose of remaining stocks of 2012 year end is being made by the industry.

The Inland Revenue Department last week issued a notice explaining the implementation of Budget 2013 proposal of imposition of VAT on wholesale and retail businesses.

As per the notice, input tax relating to tax invoices issued only after 1 January 2013 could be claimed against the output tax and input tax relating to purchases made prior to 1 January 2013 will not be allowed as a deduction.

With regard to goods forming part of closing stock as at 31 December 2012, and subject to Maximum Retail Price (MRP), the department said VAT may be collected taking MRP as the selling price with NTB is payable as at present at 2% on 50% of sales after removing VAT payable on such sales.

The supermarket industry noted that the latter process would result in the prices of stocks held on 31 December 2012 increasing by 12% to consumers.

However, fresh stocks purchased after 1 January 2013 will have input credit available and the selling price of such stocks could revert back to the original selling price as otherwise the supermarkets will not be able to survive in a competitive market.

In view of this, the industry has suggested that supermarkets be allowed to sell the stocks held on 31 December 2012 without VAT recovery for a transitional period of two to three months to dispose of same.

“By this method the prices can be maintained without significant changes for the benefit of the public,” the industry has emphasised, adding that VAT Law has transitional provisions.