The issue whether to quote prices with value added tax (‘‘VAT’’) included or excluded recently came up in the matter of Security Outfitters Safety Gear/L Munian/2016-4420F, a ruling handed down by the Directorate of the Advertising Standards Authority of South Africa (ASA Directorate) on 18 November 2016 (the ‘‘Ruling’’).
The vendor advertised its range of products and quoted the price followed by ‘‘Prices valid until stocks last. Prices excluding VAT’’. The complainant objected and argued that the prices as advertised does not exclude VAT.
The respondent submitted, that its advertising brochures clearly indicated that its prices exclude VAT and that there is no confusion to VAT being charged on the advertised prices. The Value Added Tax Act (the ‘‘VAT Act’’) states that any price charged by a vendor for a taxable supply shall be deemed to include any VAT that is to be levied on such supply.
The VAT Act further states that price advertised or quoted by a VAT vendor must include VAT and the vendor must state in the advertisement or quote that the price includes VAT, unless the total price quoted or advertised is displayed as excluding tax and the price inclusive of tax are advertised or quoted.
Therefore, if the VAT vendor decides to advertise or quote the price exclusive of VAT and the price inclusive of VAT separately, both prices must be advertised or quoted with equal importance.
SARS clarified the practice of only reflecting a price excluding VAT on an advertisement and confirmed it is not in compliance with the requirements of the VAT Act. Notwithstanding aforementioned, the VAT Act does not regard the mentioned practice as an offence.