Gov’t introduces VAT on ‘pure’ water

The National Association of Sachet & Packaged Water Producers has expressed shock at the introduction of a 17.5 percent Value Added Tax (VAT) on sachet water by government without its knowledge.

According to the association, some of its members indicated that officials of the Ghana Revenue Authority (GRA) approached them to collect VAT on their products for 2014 and 2015.

The association said when they resisted attempts by GRA officials to collect the VAT; they were told that government has since 2013 introduced VAT on ‘pure’ water, which has befuddled them.

As a result of that, the association, in a letter dated 3rd September 2015, appealed to the Ministry of Finance for an interpretation of a section of the Value Added Tax Act, 2013 (Act 870) following the insistence by officials of the Ghana Revenue Authority (GRA) that they should pay VAT on sachet water which formerly was not the case.

Under First Schedule (Exempt Supplies) (Sections 35 and 37) Item 8 of page 57 of the VAT Act, 2013 (Act 870), the law indicates that no VAT shall be charged on a supply of water, excluding water commonly supplied in bottles or other packaging suitable for supply to consumers.”

However, the Finance Ministry, reacting to the above-stated concern of the association, said it “has checked with the GRA on the matter and has come to understand that the GRA was not in contravention of the law by charging VAT on sachet water.

“The GRA is just enforcing what the law says,” it mentioned in a letter signed by Major (rtd) M.S. Tara, Chief Director of the Ministry of Finance, dated 29th September, this year.

“We wish to state that this ministry shares the sentiments of the water producers association and understands that even though sachet water is a packaged product, charging VAT on it would make it a bit expensive and beyond the reach of the ordinary Ghanaian.

“However, it has to be noted that it would require an amendment by Parliament to the existing law in order to consider and waive the VAT charge on sachet water which is a packaged product and under a strict interpretation of Act 870 of the VAT Act, 2013 is not VAT exempt,” the Ministry stressed.

An executive of the Association, who spoke to BUSINESS GUIDE yesterday in an interview, said the development would take a heavy toll on the operations of the association’s members and translate into high prices for the products.

“Already, we are reeling under the harsh effects of the power outage and if the GRA should continue insisting on collecting VAT from us, that would force us to close down and send home most of our staff away. Also, the ordinary Ghanaian would have to pay a high price.”

According to the association, a lot of parliamentarians recently said they were unaware of that arrangement and had been deceived.

They, therefore, called on all Ghanaians to help them fight government for a waiver of that tax since it would impose untold hardship on the ordinary Ghanaian.

A bag of sachet water containing 30 pieces would attract a VAT of GH¢0.48, which translates into 2 pesewas on a sachet.