- 15 Marks
Question
Havillah Manufacturing Limited is a company that is engaged in the manufacture of different kinds of perfume, body lotions and other cosmetic products.
The statement of profit or loss of the company for the year ended September 30, 2021, is as follows:
| N’000 | N’000 | |
|---|---|---|
| Turnover | 206,250 | |
| Less cost of sales | (112,750) | |
| Gross profit | 93,500 | |
| Other income | 34,375 | |
| 127,875 | ||
| Less operating costs: | ||
| Operating expenses | 62,975 | |
| Interest and similar charges | 3,520 | (66,495) |
| Profit before tax | 61,380 | |
| Taxation | (6,875) | |
| Profit after tax | 54,505 | |
| Dividend | (42,350) | |
| Retained profit for the year | 12,155 |
You are provided with the following additional information:
(i) Turnover is made up of N64,350,000 export sales and N141,900,000 local sales.
(ii) Cost of sales comprises:
| N’000 | |
|---|---|
| Opening inventory (VAT inclusive) | 24,915 |
| Closing inventory (VAT inclusive) | 40,865 |
| Purchase of raw materials | 94,600 |
| Freight charges | 20,570 |
| Other direct materials | 13,530 |
(iii) The company purchased plant and machinery which cost N24,750,000. This amount was included in opening inventory, VAT inclusive.
(iv) Value added tax and withholding tax remitted during the year amounted to N2,173,180 and N1,787,500, respectively.
You are required to:
a. Compute the net VAT payable by Havillah Manufacturing Limited for the year. (10 Marks)
b. State FIVE VAT exempt goods. (2½ Marks) c. State FIVE VAT exempt services (2½ Marks)
Answer
. Havillah Manufacturing Limited Computation of net VAT payable to FIRS For the year ended September 30, 2021
| N | N | |
|---|---|---|
| Output VAT | ||
| Local sales (N141,900,000 @ 7.5%) | 10,642,500 | |
| Input VAT | ||
| Opening inventory (N24,915,000 – N24,750,000) x 100/107.5 | 153,488 | |
| Purchase of raw materials | 94,600,000 | |
| Freight charges | 20,570,000 | |
| Other direct materials | 13,530,000 | |
| 128,853,488 | ||
| Closing inventory (N40,865,000 x 100/107.5) | (38,013,953) | |
| Cost of goods | 90,839,535 | |
| Input VAT (N90,839,535 @ 7.5%) | (6,812,965) | |
| VAT payable | 3,829,535 | |
| VAT remitted | (2,173,180) | |
| Net VAT payable | 1,656,355 |
NOTE – The export sales were excluded from the computation because export sales are VAT exempt items.
b. VAT exempt goods include:
i. All medical and pharmaceutical products;
ii. Basic food items;
iii. Books and educational materials;
iv. Baby products;
v. Plant, machinery and goods imported for use in the Export Processing Zone or Free Trade Zone; provided that 100% production of such company is for export, otherwise tax shall accrue proportionately or the profits of the company;
c. VAT exempt services include:
i. Medical services;
ii. Services rendered by Community banks, people’s bank and mortgage institutions;
iii. Plays and performances conducted by educational institutions as part of learning;
iv. All exported services;
v. Public transportation services;
- Topic: Value-Added Tax (VAT)
- Series: MAY 2024
- Uploader: Samuel Duah