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VAT Learner Notes

The document provides information about value added tax (VAT) in South Africa, including: 1. VAT is a tax of 15% levied on most goods and services in South Africa, with some essential items exempt. 2. The VAT exclusive price excludes VAT while the VAT inclusive price includes VAT. To calculate one from the other requires multiplying or dividing by 1.15. 3. Examples are provided to demonstrate calculating VAT exclusive and inclusive prices, total costs excluding and including VAT, and the VAT amount.

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rosaliankone
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49 views

VAT Learner Notes

The document provides information about value added tax (VAT) in South Africa, including: 1. VAT is a tax of 15% levied on most goods and services in South Africa, with some essential items exempt. 2. The VAT exclusive price excludes VAT while the VAT inclusive price includes VAT. To calculate one from the other requires multiplying or dividing by 1.15. 3. Examples are provided to demonstrate calculating VAT exclusive and inclusive prices, total costs excluding and including VAT, and the VAT amount.

Uploaded by

rosaliankone
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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NORTHERN CAPE DEPARTMENT OF EDUCATION

MATHEMATICAL

LITERACY

LEARNER NOTES

VAT
TAX

Tax
A compulsory levy imposed on citizen’s earnings or purchases to fund the activities of
government.

Taxable
A service, purchase or item or earning that has tax applied to it.

Tax invoice
Printed record of what was bought, what it cost, what was taxable, the tax amount, method of
payment, amount tendered, and change due, if any.

Indirect tax
Tax which is levied on the income or profits of the person who pays it e.g. income tax

Direct tax
Tax which is levied on goods or services e.g. VAT

VALUE ADDED TAX (VAT)

1. Value Added Tax (VAT) is a tax that is levied at 15% (currently in South Africa)
on most goods and services, as well as on the importation of goods and services
into South Africa.
The Minister of Finance announced during the Budget Speech in February 2018 that
VAT will increase from 14% to 15% in the 2018/2019 financial year.

VAT is not charged on some essential groceries in South Africa. These include:
paraffin; brown bread; maize meal; samp; mielie rice; dried mielies; dried beans;
lentils; tinned sardines; milk powder; milk; rice; vegetables; fruit; vegetable oil and
eggs.

2. VAT exclusive price is the price before VAT is added.


VAT exclusive price = VAT inclusive price ÷ 1,15

3. VAT inclusive price is the price after VAT is added.


VAT inclusive price = VAT exclusive price × 1,15

4. VAT = VAT inclusive price - VAT exclusive price

2
A new Polo Vivo costs R165 130,43 excluding VAT (VAT exclusive). Calculate the price of
the Polo, including VAT (VAT inclusive).
Price VAT inclusive = Price VAT exclusive × 1,15

WHERE DOES 1,15 COME FROM?

Value Added
Tax

= 100% (Price excl VAT) + 15% VAT = 115% (Price incl VAT)

115
115% = = 1,15
100

Price VAT exclusive = Price VAT inclusive ÷ 1,15

Price of POLO Vivo including VAT = R165 130,43 × 1,15 = R189 899,99

NB!!! – Price excluding VAT is NOT minus (-) 15%

There is no such method where 15% is calculated and subtracted.

3
EXAMPLES

Tyron makes a gift basket containing the following items


ITEMS (per unit) SELLING PRICE
Bar-One R10,04
Peppermint Crisp R8,70
Kit Kat R20,66
Cadbury 80 g chocolate slab R6,73
Empty basket R29,99
(5)
1. Determine the price of each item excluding VAT.

2. Determine the total cost price of a gift basket, excluding VAT. (2)

3. Determine the total amount of VAT on a gift basket. (3)

Solutions:
1. R10,04
= R8,73
1,15
R8,70
= R7,57
1,15
R20,66
= R17,97
1,15
R6,73
= R5,58
1,15
R29,99
= R26,08
1,15

2. R8,73 + R7,57 + R17,97 + R5,85 + R26,08


= R66,20

3. R76,12 – R66,20
= R9,92

4
QUESTION 1

The price list given below shows the price for different types of clocks. Study the price
list and answer the questions that follow.
CLOCK A CLOCK B
Including VAT: R3 350,00 Excluding VAT: R220,00

CLOCK C CLOCK D
Excluding VAT: R2 100,00 Including VAT: R5 950,00

[Adapted from www.pricecheck.co.za]

1.1 What does the acronym VAT stand for? (2)

1.2 At what percentage (%) is VAT levied (charged)? (2)

1.3 Calculate the cost price of CLOCK A and D, excluding VAT. (4)

1.4 Calculate the selling price of CLOCK B and C, including VAT. (4)

1.5 Determine the amount of VAT that will be paid on each clock. (4)
[16]

5
QUESTION 2

A sleeper couch is advertised at Mega Shop as below.

PRICE PRICE
Was Now

R2 699 R1 999
(including VAT) (excluding VAT)

CAYMAN
Sleep Couch
l

Use information above to answer the questions that follow.

2.1 Show that the couch's original price excluding VAT was R2 346,96. (3)

2.2 Show with calculation that a customer is expected to pay R2 299 including
VAT when purchasing the couch at SALE price. (3)
[06]

QUESTION 3

VAT in South Africa increased to 15% with effect from 1 April 2018.

The following shows how a vehicle dealer calculated the new increased VAT incorrectly:

Selling price of the vehicle is R160 087,72.

Selling price, including 14% VAT =R160 087,72+14% of R160 087,72


=R160 087,72 + R22 412,28
=R182 500
VAT increased with 1%.
New selling price, including 15% VAT = R182 500 + R182 500 × 1%
= R182 500 + R1 825
= R184 325

Identify the mistake the dealer has made in calculating the new selling price. Hence,
calculate the new selling price, including 15% VAT (excluding accessories and
other charges). (4)
[04]

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