The GRA wishes to provide guidance to our stakeholders (business and consumers) on how to use the Value-Added Tax (VAT) “Tax Fraction”.

With effect from 2016 the rate of VAT was reduced to fourteen percent (14%) from sixteen percent (16%). This is in keeping with Regulations 2 pursuant to Section 9(1) of the Value-Added Tax Act, Chapter 81:05.

Section 2 of the Value-Added Tax Act, Chapter 81:05 states that, “tax fraction” means the fraction calculated in accordance with the formula-

R/ (1 + R)

Where “R” is the rate of VAT applicable to the taxable supply;”

Computation of VAT Tax Fraction:

R / 1+R     =  14% / 1+14%

=   14 / 100 / 1+14 /100

=  14 /100    x  100 /114

= 14 /114

VAT Tax Fraction    =  7/57

The VAT tax fraction is used to compute the amount of tax paid or payable by consumers in cases where the business advertises VAT inclusive prices and the consumer wants to determine how much VAT was paid or if the consumer wishes to know what the cost is excluding the VAT.

Also, the Guyana Revenue Authority (GRA) uses the VAT tax fraction to determine how much VAT should be paid, by businesses that are registered for VAT and fails to charge VAT.

Section 90 (1) of the VAT Act Chapter 81:05, states that “A price charged by a taxable person in respect of a taxable supply is deemed to include, for the purposes of this Act, the tax charged on the supply under section 9(1)(a), whether or not the taxable person has included tax in such price.”

Therefore, if a registered person fails to charge VAT, then the price that was charged for the goods or services will be deemed to include the VAT.

Additionally, consumers who are issued with VAT inclusive invoices (sale invoices) can determine the actual amount of VAT paid on the goods or service being supplied by applying the same principle.

For example, if a businessman sells the case of drink for $2,500 VAT inclusive to the consumer who wants to determine how much VAT was paid; then the same principle is applied using the VAT tax fraction (7/57).

$2,500 x 7/57  = $307 (VAT inclusive)

Price    = $2,193

VAT    = $307

 Alternatively:

$2,500/ 1  x   7 /57    = $17,500

  7 /57  x $2,500 /1     = $17,500 /57

VAT   = $307

Contact Us:
Tax Advisory Services Section
Communications & Tax Advisory Services Division
Guyana Revenue Authority
200 -201 Camp Street
Georgetown
Guyana
Tel: 227-6060 | 227-8222 Ext: 8000
Email: taxadvisory@gra.gov.gy
Website: www.gra.gov.gy