- 10 Marks
AT – Nov 2024 – L3 – Q4a – Value Added Tax Deductibility
Determine the deductible input VAT for a VAT-registered company operating multiple business divisions under different VAT treatments.
Question
The two scenarios below relate to ClearTel LTD, a VAT-registered company in Ghana. Each scenario is an independent scenario and should be considered separately.
Scenario 1
ClearTel LTD operates three divisions (XYZ). Division X deals in the sale of computers and mobile phones. Division Y deals in the sale of locally-manufactured sanitary towels. Division Z is into the supply of fertilizers to farmers in Ghana.
Revenue from each division for 2024 is shown below:
| Division | Description | Revenue (GH¢) |
|---|---|---|
| X | Computers and mobile phones | 1,005,700 |
| Y | Sale of locally-manufactured sanitary towels | 2,500,000 |
| Z | Supply of fertilizers to farmers | 78,800,000 |
ClearTel LTD has incurred total input VAT of GH¢50,500,000, and the Finance Manager of the company is unable to determine specifically which division of the business this input VAT amount relates to.
Required:
Determine the amount of input VAT ClearTel LTD can deduct, in line with the provisions of the Value Added Tax Act, 2013 (Act 870 as amended). Justify your answer
Find Related Questions by Tags, levels, etc.
- Tags: Deductibility, Exempt supplies, Input Tax, Mixed Taxation, VAT, Zero-rated supplies
- Level: Level 3
- Topic: Tax administration in Ghana, Value-Added Tax (VAT)
- Series: Nov 2024