Is the sale of grass (to be used by a riding school as animal feed) exempt from VAT?
16 July 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: Is the sale of
grass for horse feed classified under raw materials and thus exempt from VAT?
A farmer sells grass for horse feed to a riding school,
which does not have a VAT certificate indicating that all grass purchases are
exempt from vat. The farmer is a VAT vendor.
A: There is no
exemption from value-added tax that would apply where a registered vendor (the
farmer) supplies "horse-feed” to the recipient (the riding school). We do agree that the rate of zero per cent is
not available either. Section 11(1)(g)
provides that a supply may be zero rated if the supply is of goods used or
consumed for agricultural, pastoral or other farming purposes as are set forth
in Part A of Schedule 2, provided such supply is made in compliance with such
conditions as may be prescribed in the said Part. Item 1 in paragraph 1 of the Schedule refers
to animal feed, but then prescribes the following condition:
"The provisions of paragraph 1 shall apply only if—
(a) the Commissioner, in respect of a vendor registered
under this Act, is satisfied that that vendor, being the recipient of any such
goods, carries on agricultural, pastoral or other farming operations and has
issued to him a notice of registration in which authorization is granted
whereby the goods concerned may be supplied to him at the rate of zero per
As the riding schools VAT103 doesn’t have the authorisation
the condition is not met and the supply is to be charged at the standard rate
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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.