Is the supply of lucerne by a farmer subject to VAT if the purchaser is also a farmer?
15 April 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: My client is a
farmer who produces and sells lucerne.
If the purchaser is a farmer and can produce a
VAT registration certificate that proves this, is the supply vatable?
Is lucerne a vatable item or does it qualify to
be sold at a zero VAT rate?
A: Item 1 states
that animal feed, i.e. goods consisting of—
(a) (i) any substance obtained by a process of crushing,
gristing or grinding, or by addition to any substance or the removal therefrom
of any ingredient; or
(ii) any condimental food, vitamin or mineral substance or
other substance which possesses or is alleged to possess nutritive properties;
(iii) any bone product; or
(iv) any maize product,
intended or sold for the feeding of livestock, poultry, fish
or wild animals (including wild birds); or ...
The phrase ‘maize product’ is not described in the Act and
must take its dictionary meaning. According
to the Oxford dictionary maize in English (noun) means "a Central American
cereal plant which yields large grains (corn or sweetcorn) set in rows on a
cob. The many varieties include some used for stockfeed and corn oil. Zea mays,
family Gramineae and alfalfa mean "a leguminous plant with clover-like leaves
and bluish flowers, native to SW Asia and widely grown for fodder. Also called
It may well be that lucerne is not a maize product, but it
is outside the scope of guidance on tax legislation to comment on whether or
not lucerne is a maize product. SARS, in
the VAT404 or otherwise provides no guidance on the meaning of maize
products. We suggest the client obtain a
ruling from SARS in this regard or obtain confirmation from a specialist in
agriculture produce. If it is not the
rate of zero per cent can’t be applied.
In order to be able to purchase the above goods at the zero
rate, the following requirements must be met:
• The notice of VAT registration (VAT103) must be presented
to the supplier.
• The VAT103 must contain a clause no. 7 on it, confirming
that the main business is a farming agricultural or pastoral enterprise.
• The VAT registration number of the purchaser must appear
on the tax invoice.
• The goods supplied must be specified in Part A of Schedule
2 to the VAT Act.
Disclaimer: Nothing in this query and answer should be construed as
constituting tax advice or a tax opinion. An expert should be consulted for
advice based on the facts and circumstances of each transaction/case. Even
though great care has been taken to ensure the accuracy of the answer, SAIT do
not accept any responsibility for consequences of decisions taken based on this
query and answer. It remains your own responsibility to consult the relevant
primary resources when taking a decision.