How will the 1% VAT increase affect your grocery list?
Finance Minister, Malusi Gigaba, recently announced that South Africa will see its first Value-Added Tax (VAT) rate increase for the first time in 25 years.

As of 1 April 2018, the effective VAT rate will rise from 14% to 15% adding approximately

R22, 9 billion to the fiscus,” Gigaba said in his budget speech. The VAT hike is central in a set of tax increases due to a budget shortfall of R48, 2 billion, and will result in an additional 52 cents per litre for fuel levies and increased rates for higher estate and luxury goods duties.

With this 1% VAT increase, comes the introduction of the health promotion levy (Sugar Tax). Below is an indication of how the 1% VAT increase will affect your monthly shopping list:

1. Alcohol and tobacco

A pack of 20 cigarettes will cost R1.22 more and 25g of pipe tobacco will cost 38 cents more. Wine lovers will pay 30 cents more for a 1-litre bottle, and when you’re celebrating with a bottle of sparkling wine, you’ll need an extra 97 cents. Spirit drinkers will pay R4.80 more for a 750ml bottle of their favourite tipple. Beer and cider drinkers need deeper pockets too. 340ml cans of malt beer and cider increase by 14 cents.

2. Sugary beverages

Sugary drinks will be taxed if they contain more than 4g of sugar per 100ml. You can find the sugar content on the drink’s nutrition label. A 340ml can of a well-known soda contains 10g of sugar per 100ml. For every gram over the 4g limit, an extra 2.1c is levied. A can of soda that costs R10, will cost R10.12 from 1 April 2018.

3. Petrol and diesel

On 4 April 2018, the price of petrol will increase by 52 cents a litre. 30 cents of this is for the road accident fund levy and 22 cents for the general fuel levy. This will most likely affect individual drivers as well as individuals who rely on public transport.

4. Plastic bags and incandescent light bulbs

The plastic bag levy increases to 12 cents a bag on 1 April, and there’s an increase from R6 to R8 on incandescent light bulbs. Switching to energy efficient light bulbs will save you some money.

5. Luxury goods such as electronics, cosmetics, smartphones and golf balls

These goods incur tax between 5 and 7%, this will increase to 7 – 9%. It won’t impact your everyday life but it is still good to know.

However, Finance Minister Malusi Gigaba said that despite the necessary increase in VAT, 19 basic food items will be zero-rated VAT. The Minister acknowledged that the increase in VAT is not desirable, given the tough economic climate and the implications it will have on lower end households.

Zero-rated Food Items

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Source: IOL