Policy 14 – VAT on Garments produced by Local Manufacturers

The following forms the guiding principle regarding the application of Value-Added Tax (VAT) on garments produced by local manufacturers.

Schedule I of the Value-Added Tax Act Chapter 81:05, provides the list of items zero-rated for VAT purposes. Paragraph 14 (r) and (t) of Schedule I zero-rates a supply of, “locally produced towels, rags, handkerchiefs and school garments” and “locally produced garments” respectively. Therefore, clothing produced by local manufacturers is not subject to VAT at the standard rate of fourteen percent (14%). This would include locally produced school uniforms such as shirts, pants, skirts, kimonos and dresses.

It is important to note that cloth is not zero-rated and therefore, it will attract VAT at the standard rate of fourteen percent (14%) regardless of whether the cloth is being used to make school uniforms or handkerchief. However, VAT registered clothing manufacturers will be able to claim any input VAT that was paid for supplies purchased to produce their zero-rated items.

Consequently, registered businesses may file for a full refund of input tax credits on a monthly basis if the zero-rated items account for at least fifty percent (50%) of the amount of the taxable supplies.

Source: gra.gov.gy

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