Hosi purchased a vacuum cleaner for R 950,00 (excluding vat) from melrose suppliers. When she received her invoice, she was surprised to see that the total amount she owes is R1092,50.

Question

State whether the vat paid on the vacuum cleaner is input or output vat

Answer 1

In this context, the VAT paid on the vacuum cleaner is considered input VAT.

Input VAT is the VAT that a business pays on its purchases, and it can be claimed back from the tax authorities if the business is VAT registered. Since Hosi purchased the vacuum cleaner from Melrose Suppliers, she is the buyer and is paying the VAT included in the total amount. The amount owed (R1092.50) includes the original price (R950.00) plus VAT.

To calculate the VAT amount, you can use the following formula:

1. Find the VAT rate (typically 15% in South Africa).
2. Calculate the VAT:
   • VAT = Purchase price × (VAT rate / (1 + VAT rate))
   • VAT = 950 × (0.15 / 1.15) = 950 × 0.13043 ≈ R123.91

Now, the total amount including VAT would be:

• Total = Purchase price + VAT = 950 + 123.91 ≈ R1073.91

To check the amount of R1092,50 (the invoice amount), you can see it reflects some rounding.

Overall, because Hosi is purchasing goods, the VAT she pays is classified as input VAT.