The Presidential Tax Reform Committee has said that the proposed Value Added Tax (VAT) reform will reduce cost of manufacturing by over 3 per cent when implemented.
The chairman , Taiwo Oyedele disclosed this in a tweet seen by NewsNGR.
Oyedele in a post titled, ‘Impact of Proposed VAT Reform on Cost Budget’ said the proposed VAT has positive implication on manufacturing.
The chairman said this to clarify questions arising from a meeting with Organised Private Sector of Nigeria (OPSN).
He said, “A participant who works for a manufacturing company asked to know when the reforms are likely to take effect and whether to include higher costs due to the proposed VAT rate increase in the company’s 2025 budget.
“This question reflects the general perception of the VAT reforms, whereas the overall impact is actually a cost reduction.”
Oyedele explained that the proposed VAT has no impact om raw material.
He said, “On manufacturing overhead- VAT on absorbed manufacturing assets is claimable. Training and development- any applicable VAT will be eligible as input VAT.
“Salaries and wages- no impact. This item is outside the scope of VAT. Professional fees- VAT will become claimable. On communications, VAT becomes claimable.
“Marketing & distribution – VAT becomes claimable. Finance cost – negligible impact as the bulk of this item is not VATable. Plant & equipment – VAT becomes claimable.
On right of use assets, any VAT becomes claimable.
On the overall impact, Oyedele noted that the total cost borne by the company reduces from 1000 to 967, reflecting a cost decline of 3.3 per cent despite the rate increase.