VAT For Jewellery Stores In UAE

What is VAT?

Value Added Tax (VAT) is a consumption tax applied on a good as its value is increased each stage of its production or distribution. It is an indirect tax that is related to a taxpayer’s consumption and not their income.VAT For Jewellery Stores In UAE is discussed below

Rate Of Taxation

VAT will be charged at rate of 5% starting 1^st January 2018. VAT would be applicable to non-essential consumer goods. Anything apart from basic food and essential commodities would fall in this taxable bracket. This would include automobiles, electronics, jewellery, restaurant services, and entertainment.

What Will Be Exempted from VAT?

The Government of UAE has stated that about items in about 100 categories like food, education, health, bicycle, fuel, transport and social services would be exempted from VAT.

Who Shall Be Taxed?

Corporations: Businesses providing goods or services falling in the taxable category, with an annual revenue of over AED 375,000, would be required to register for VAT. It is optional for companies with annual supplies and imports less than AED 375,000 but over AED 187,500. Here, companies providing health or education services may reclaim the VAT from the government.

Consumers: Anyone purchasing a non-essential is liable to pay VAT. Realtors: Any sale or renting of property for commercial purposes would attract VAT.

With the introduction of VAT in the UAE, there are considerations that businesses would have to take care of with regard to tax consulting.

Gold and Diamonds will be charged at 5% rate of tax.

Gold consumption in the UAE is the highest in the Middle East region. According to the World Gold Council, each person in the country buys about 5 grams of gold, as of 2016.

Beginning 1 January 2018, however, buyers in the country faced the prospects of having their budgets squeezed with the introduction of VAT Merchants across the UAE started charging a 5 per cent VAT to their customers who purchase goods and services across the UAE.

Impact of VAT on Gold Industry in UAE

More than 180 nationalities living in the UAE prefers to buy gold in Dubai rather than their own countries as Dubai’s gold has worldwide been associated with purity, quality, pricing and last but not the least wide range of variety at its offering. The industry experts, on the other hand, are bullish on the overall scenario and outlook of the industry post VAT era as well.While ruling out any major impact of VAT, retailers and consumers say that gold is a commodity that has great value and people prefer to invest in.

The VAT (value-added tax) on gold jewellery will likely apply to the entire piece, which effectively means an additional payout of Dh7-Dh8 a gram at today’s prices, according to industry sources. But on gold bars, deemed as investible assets, no such tax will apply. (There will also be no duty on loose diamonds.)

The decision to include gold jewellery under VAT will be spelt out in the Executive Regulation governing the application of value-added tax in the UAE.

As Tourists are also huge buyer of gold in UAE , especially arriving from European countries also have VAT imposed in their own countries on jewellery purchases, often at a rate higher than five percent, so in that regard, Dubai should remain competitive even after the imposition of VAT.

How to prepare VAT Invoices in the UAE:

VAT is expected to be implemented in  UAE with effect from 1^st January 2018. VAT Invoices should be maintained for every businesses in the UAE as per the latest information by the Federal Tax Authority (FTA).

According to the  FTA, there will be two kinds of inovices for VAT in the UAE. Supply for less than the specified amount will be considered to maintain a simplified VAT invoice – specifically for supermarkets and retail industry. However, supply for more than the specified amount will have to make a detailed invoice.

Simplified VAT invoice for supply less than the specified amount should consider the below:

• “tax invoice” in a prominent place
• Name, address & TRN of supplier
• Date of issue
• Description of goods or services
• Total amount payable
• Total VAT chargeable

The VAT invoice for supplies above than the specified amount should consider the below:

• “tax invoice” in a prominent place
• Name, address & TRN of supplier
• Name, address & TRN of recipient (where they are a registrant)
• A sequential or unique identifying number
• Date of issue
• Date of supply if different to the date of issue
• Description of goods or services
• Unit price, quantity or volume supplied, rate of tax and amount payable in AED
• Value of any discount offered
• Gross value payable in AED
• Tax amount payable in AED
• Statement relating to reverse charge if applicable

VAT Payment

VAT is charged at 5% on total value of the final goods. As vat is collected at every channel of production and distribution Government will not collect the tax upfront on the final good only. The difference amount resulting from VAT recovered on sale of final good and VAT paid at the procurement of raw material is the Taxable amount that is paid to the government.

Understanding with the formula:

VAT=Output Tax – Input Tax

Output tax: VAT collected on sales of goods and services.

Input Tax: Tax paid on purchase of goods

Calculation with an example

A gold jewellery store purchases his product at AED 100.00 from a supplier. The VAT at 5% would be AED 5 The store pays  AED 105 and the supplier pays AED 5 in VAT to the government. The storekeeper then sells the jewellery to a consumer for AED 150. The VAT would be AED 7.50 and the consumer pays the jewellery store AED 157.50 The store pays AED 7.50 to the government – but receives a credit of AED 105 from the government -on the purchase of the jewellery from the supplier. The total value consumed is AED 150 and thus total VAT the government should collect is AED 7.50 The government has collected AED 7.50 in total – AED 5.00 from the supplier and AED 2.50 from the store keeper.

Exceptions on Input Credit

• It is possible to have unclaimed input credit. Being tax on purchases higher than tax on sale. In such a case, you are allowed to carry forward or claim a refund.

If tax on inputs is greater than  tax on output –> carry forward input tax or claim refund

If tax on output is greater than tax on inputs –> pay balance

  No interest is paid on input tax balance by the government

• Input tax can be claimed on taxable and zero rated supplies.
• You must be registered as a taxable person under VAT

• If the entity of registered taxable person changes due to sale, merger or transfer of business, then unused ITC shall be transferred to the sold, merged or transferred business
• Since VAT is charged on both goods and services, input credit can be availed on both goods and services (except those which are on the exempted/negative list).
• Input tax credit is allowed on capital goods.

Non Availability of Input Tax Credit for the following cases

• Input tax is not allowed for goods and services for personal use.
• No input tax credit shall be allowed after VAT return has been filed following the end of the financial year to which such invoice pertains or filing of relevant annual return, whichever is earlier.
• Input tax credit cannot be taken on purchase invoices which are more than one year old. Period is calculated from the date of the tax invoice.
• If depreciation has been claimed on the cost of capital goods, then they are not eligible for Input Tax credit.

VAT REGISTRATION

Businesses can register for VAT tax through the e-services section on the FTA website. However, they need to create an account first. All businesses must submit an application to register for VAT as soon as possible to avoid the risk of missing the deadline that is 1 January 2018. Those who fail to apply for VAT would be liable to fine/s as per the Administrative Penalties stipulated in Cabinet Decision No. 40 of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE.

ONLINE PROCEDURE FOR VAT REGISTRATION

1. Visit the official website of the Ministry of Finance
2. Click the option of VAT certificate to reach the page
3. Follow the option of Start Service by clicking it
4. Complete the registration process and create your unique login id and password
5. Now you can login and reach the customer landing page
6. Click the option for “create  a new tax request”
7. Fill up the required details
8. After submitting you will be directed to the payment gateway
9. Pay the online fees  for VAT registration.

After payment an acknowledgement or confirmation receipt will be generated.

Accounting and Audit:

• Proper accounting records to be kept.
• Time of supply rules will determine when to account for output VAT. Goods – when goods are made available to customers and Services – earlier of issuance of Invoice or receipt of payment.
• VAT is a rules based law and accounting principles of accrual or cash basis do not apply.
• Minimum data requirements defined to be included in Invoices. TRN No, Date of sale, Emirate of sale, clear description and quantity of goods, amount of sale etc.
• All accounting records to be kept for minimum of 5 years.
• No action can be taken by Federal Tax Authority after 5 years but no limit in case fraud is found.
• External Audit of accounts is not mandatory.
• Businesses in the UAE (and GCC)should start planning now how the changes could impact their business, to ensure a smooth transition. Businesses will have to adapt to the changes by identifying
• the impact of VAT on their business, and key immediate considerations are to:
• Assess capability of existing systems
• Identify VAT implementation strategy
• Identify contracts that need a VAT action
• Identify intercompany transactions
• Undertake training/awareness
• A potential  VAT implementation will also have immediate effects on consumer behaviour which gives opportunities for companies to assess their business direction and to plan strategically.

VAT Returns:

UAE taxpayers should file VAT returns with the Federal Tax Authority (FTA) on a quarterly basis. Returns must be filed according to the procedures specified in the VAT legislation, within 28 days from the end of the tax period. Taxpayers can file their returns online using e-services. A VAT return is generally paid four times a year and in some cases monthly. Timely submission of the e- returns keeps the company ingood books with the tax authorities. Even if you have not paid VAT, a nil return needs to be submitted if you are a VAT registered company.

• The return will include only summary data of purchases and sales, Input & Output tax and which Emirate the sale has been done.
• Returns will be quarterly and must be filed and tax paid within 28 days of quarter end.
• All returns and tax payment will be fully electronic.

CONCLUSION

VAT will be introduced in the UAE, along with other Gulf countries, from the beginning of 2018 at 5 per cent. The government is likely to use its ability to either zero-rate or exempt many supplies most likely to impact the common man to ensure that the impact of VAT is kept to a minimum. Essentially, the intentions of most governments when introducing a VAT is to focus more on taxing discretionary spend by consumers, while ensuring that those at the lower end of the spectrum are protected and assisted.

Reach Accountant is the ultimate guide providing solution to suit your business needs.There is a tendency the gold market can react adverse to the introduction of VAT, but proper business planning and appropriate software will help the business run smoothly. Various features of the software designed exclusively for jewellery stores.

Business Intelligence Dashboard:The software has a feature of  providing you key statistics of the business at any given point of time.The dashboard displays work status, profit and loss, expenses graphically.It also features  best Selling Executive, Highest Selling product, Largest value customer for the month. Every night the client gets a SMS summing up the entire sales , expenses ,case production ,and stock value for the day.

Abide by to Regulatory Compliance: The whole industrial operations   are governed by existing country rules .Non compliance and violation of law may lead to cancellation of the license to operate the business.ERP software are embedded with laws and regulations of the country, ensuring and guiding business is carried out according to the  prevailing laws.

Accounting: It covers the broad head under the computation, from Trading a/c,Journal entries  to ledgers ,Income and expense a/c  and Balance  Sheet, Cash flow Management, Budgeting and forecasting,accounts payable and account receivables .It also helps maintain the Bank Transactions-Contra entries ,Taxation  and Audit.

Cost Effective:Saves IT cost associated with maintaining,integrating,upgrading separate applications.

Manufacturing Management : Manage the production process such as purchase approvals ,raw materials and retrieve the finished products reports for future references.

Order Management  :Receive the sales order and convert them in to invoice once ready Order management is all about keeping track of orders and managing the people, processes and partnerships required to fill them. It involves keeping track of the order itself and managing data around the customer and finally intimating the customer about the readiness of then product. The process includes:

• The sales and/or customer service representative discusses the order with the customer and enter the order into the system to be filled with details  such as design, weight of the Jewellery, wastage ,making charges if any and date to be delivered.
• The order is then processed as per the form filled by the customer by the goldsmith or the craft man of the Jewellery store.
• Once the product is finished the customer is intimated through mobile application service.

The customer who places the order, receives it and pays for it

• Back office functions such as accounts receivable, accounts payable and general ledger that generate invoices and accept payments are processed done.

Goldsmith Outsourcing: Reach Jewellery software also aids in outsourcing the process to other goldsmiths .The software keeps a track of all the orders that are pending with gold smith with details such as old gold exchange, rate of gold per gram, making charges and wastage and date of receipt.

Point Of Sale: Touch and Keyboard billing system.One of the features is the software works even when net is also down.

Barcode and Batches Management: Generates batch codes and barcodes  and reads automatically on a bar code scanner.

Project: Cost Management reflecting cost at every stage of production. Order Management –Used for invoice orders.

Invoicing: Generates invoice of the company brand or can choose from the available templates in the software. It also converts quotes to invoice .One of the features is the software can convert the Foreign currency invoices to INR. Get reminders on due invoices through SMS and emails.

Multi Branch: Gives the option of owning the business individually.

Purchases: Purchase Orders/Estimates,Purchase Bills,Purchase Return,Vendor Outstanding Management.

Sales:  Provides  with quotation, operational product, Sales invoice and sales returns ,Recurring invoices in one order and customer balance.

Access: Multi-User operation with restriction menus, Auto Back up ,Accounting Period Auto change ,Any Location operation, Easy to handle ,No hard accounting process and buttons, Auto conversion to accounting formats

Multi Company :Benefit of handling the business operations from the touch of the smart phone.

Auditor View: Full-fledged Financial reports,Tax reports,VAT reports,read process by auditor, with e-filing options,PF & ESI Reports,Tax Consulting Modules

Mobile Application:Business is just a touch away from you. Easy access through tabs,ipads,iphones,android phones.Click pictures of expense vouchers and attach to expenses.Raise invoices, check cash and bank balances,day to day income and expense and other reports through mobile applicatons.

Business Automation: Business expansion by  searching leads suitable for your business profile ,Leads  from mail server,Changing leads to appointments,converting quotations to invoices,

Addons: E-stores, Google docs, Google calender , Project management tools, SMS gateways, Payment Gateways are few to name.

Tally Import: Import excel files   from  tally to Reach software and manage accounts with smooth transitions.

User Friendly: Softwares are designed is such a way that the user will find it easy to operate.

API: The client can integrate the existing software with Reach accounting app,seamlessly.

Pricing of the software: No upfront investment, Low monthly rentals ,free servers,free routers,LAN ,Network cabling not required,Anti Virus not required, free data back up.