(MENAFN- Khaleej Times) As consumers across the UAE familiarise themselves with a value-added tax (VAT) system, many have put several purchasing decisions on hold until they are better aware of how the tax works and how they will be charged.
Experts have urged shoppers to learn about the tax so that they know where and on what items it will be applicable.
The Federal Tax Authority (FTA) has also cautioned residents to beware of vendors who are charging and collecting the tax without having registered for it.
"Businesses are not allowed to charge VAT unless they are registered for VAT and have a TRN," the FTA said in a public awareness message.
The FTA has further explained that the details of the tax should be displayed in the tax invoice issued to consumers, and will include the total price with the amount that is being charged as tax. It should also clearly mention 'Tax Invoice' and the company's TRN.
Experts have also clarified the issue related to the rounding up of charges when paying bills. This comes to light after many consumers have voiced their concerns about not being given exact change when they are shopping. The Abu Dhabi Department of Economic Development (ADDED) has informed that a small change of 10fils and 5fils can be rounded off to 25fils and that retailers should not charge customers more than 20fils in addition to the bill amount.
Anurag Chaturvedi, senior director at Crowe Horwath, told Khaleej Times that this move has been taken since the lowest currency amount in circulation in the UAE is 25fils. "Article (61) of Executive Regulations, where the VAT amount is calculated in fils, says that a taxable person can round it to the nearest fils. So, an amount of Dh10.39 can be rounded to Dh10.50 and an amount of Dh10.71 can be rounded to Dh10.75," he said.
Members of the public have been asked to report any complaint via the call centre at the Ministry of Economy on the number 600522225, which works from 7.00am to 10.30pm.
Meanwhile, etisalat has also cautioned customers not to pay more than the issued amount on any of its recharge cards. The telecom company has clarified that it has not increased the prices of its prepaid recharge cards after the implementation of VAT. Etisalat has also asked distributors to adhere to the approved pricing policies and not to levy any additional fee.
"Etisalat has introduced five denominations of recharge cards sold at Dh30, Dh55, Dh110, Dh210 and Dh525 to ensure customers have sufficient credit to subscribe to existing data and combo packages after adding five per cent VAT. The five per cent VAT will only apply on the actual usage, and not on the prepaid recharge cards value. Prepaid users will not pay any extra fee when they recharge," the management said in a statement.
Telecom services are subject to the standard rate of VAT and any data plan that was taken in 2017 and spilling over 2018 will be subject to a VAT of five per cent.
When it comes to buying gold jewellery, shoppers are subject to the five per cent VAT.
According to the FTA, the tax will be imposed on investment gold, silver and platinum jewellery with less than 99 per cent purity. In addition, shoppers should be aware that the VAT will be applicable on the whole jewellery piece rather than on the making costs charged by the goldsmiths.
"VAT is a federal law and applicable to almost all the traders in the jewellery industry," said Darshan Shah, MD of N. Gopaldas Jewellers. "It is not possible that some establishments can claim to sell without VAT. They will be indirectly charging. Members of the Dubai Gold and Jewellery Industry have been most supportive of the various government initiatives and have implemented VAT wholeheartedly."
Dilip Jain, principal-VAT at Nimai Management Consultants, also clarified concerns regarding VAT being charged on education.
"Education in universities, unless 50 per cent funded by a government grant, will be directly hit, as the fee and all expenses will be subjected to the tax. The only exception is the rent for the students stay in student accommodation."
Naveen Sharma, chairman of the Institute of Chartered Accountants of India - UAE (Dubai Chapter), also revealed that when it comes to the VAT affecting the healthcare sector, consultancy and medicines are going to be zero rated for preventive and treatment related charges. "There is a list of zero rated medicines and medical equipment announced by Cabinet decision. Elective and cosmetic related treatments will be subject to VAT."
Lastly, when it comes to leisure and entertainment activities, Thomas Vanhee, founding partner at Aurifer Middle East Tax, explained that entertainment constitutes a service, and seeing that there is no exemption or zero rate applying, all types of entertainment will be subject to five per cent VAT. This means that theme parks, cinema tickets, concerts and restaurants will now be charging more from residents.
"In general, VAT will mean an increase in prices for individual consumers but the increase will be marginal because of the basic nature of the VAT and the way it works in the form of credits and basic exclusions," said Pratik Shah, resident partner at WTS Dhruva Consultants.
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Rohma Sadaqat I am a reporter and sub-editor on the Business desk at Khaleej Times. I mainly cover and write articles on the UAE's retail, hospitality, travel, and tourism sectors.Originally from Lahore, I have been living in the UAE for more than 20 years. I graduated with a BA in Mass Communication, with a concentration in Journalism, and a double minor in History and International Studies from the American University of Sharjah.If you see me out and about on assignment in Dubai, feel free to stop me, say hello, and we can chat about the latest kitten videos on YouTube.
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