CPA warns against price hike after VAT roll out

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To make sure the Value Added Tax (VAT) is properly implemented in all commercial outlets, the Consumer Protection Authority (CPA) has warned against undue price hikes on goods and services excluded from the purview of the tax.

Accordingly, teams from the CPA would conduct regular and random inspections of shops to ensure that the VAT is applied on goods that fall under the taxable merchandise category.

“Prices of all commodities available in the market are closely monitored by the Consumer Protection Authority. Any violation of VAT guidelines will attract penal actions against the offending commercial outlets,” a source from the CPA told the Observer.

“Any attempt to unjustifiably increase the prices of goods exempted from taxation would amount to an offence and legal action would be taken accordingly,” said the source and added the CPA would also monitor if the prices of taxable items increased as per VAT norms.

The VAT, which came in to practice on April 16, has exempted some around 488 essential food products, including fruits, vegetables, meat, dairy, food grains, nuts, baby food, mineral water, and juices. Failing to register for VAT could lead to penalties.

“Commercial entities are not supposed to increase prices of non-taxable goods and not more than five per cent on taxable goods. This has been monitored by the Ministry of Commerce, Industry and Investment Promotion as well as the Consumer Protection Authority,” said Davis Kallookkaran, Founding Managing Partner at Howarth Crowe, a leading audit firm.

Goods imported from other countries are exempted from VAT at the time of supply to the country, while items of special needs individuals are also exempt from VAT.

Other major products and services excluded from VAT are education, including kindergarten, higher education and vocational training, healthcare, including surgery, lab and dentistry services, ambulance service, psychiatry, and physiotherapy.

Financial transactions such as loan, fund transfer, deposits, issuance of shares, bonds and other securities, insurance, and credit transactions concerning lease, ownership termination, and credit guarantee don’t fall under the purview of VAT.

The sale of undeveloped land and resale or lease of residential real estate, vehicles used in emergency services, public transport, diplomats, and cargo operations, special tax exemptions for businesses in free zones, goods exported directly or indirectly, as well as exported, from Oman are not included in the taxable goods.