Facts on General Consumption Tax

Registration

• Registration for GCT purposes

• How and when to apply

• Post-registration Procedures

Charging GCT

• Taxable supply

• Place of Supply

• Time of Supply

• Value of Supply

• Rates of GCT

• GCT on Imported Goods and Supply

Records and Accounts

• Legal requirements

• Records and Books to be Kept

• Tax Invoice

• Records of Sales and Purchases

• Input Tax

• Accounting Bases

• Simplified Accounting Methods

GCT Returns

• Basic Information

• Standard Return, Normal Accounting Methods (Form 4A)

• Simplified Return, Simplified

• Accounting Method (Form 4B)

• Furnishing the Return

• Penalty and Surcharge

Assessments, Objections, Appeals, Penalties

• Assessment on Registered Taxpayers, Registered Persons

• Amendment of an Assessment

• Notices and Time Limits for Assessments

• Objections

• Appeals

• Penalties

• Zero-rated Items

Appendix 11

• Special Consumption Tax (SCT)

Appendix 111

• Goods Exempt from Tax

• Services Exempt from Tax

Appendix IV                                                                                                                                            

• GCT Application for Registration Form

• Notice of Registration

• Certificate of Registration

• GCT Return Form 4A

• GCT Return Form 4B

Introduction

The General Consumption Tax (GCT) which commenced on October 22, 1991 has simplified and modernized the Jamaican indirect tax system.

The GCT has replaced the following eight (8) taxes:

• Excise Duty     

• CARICOM Duty

• Retail Sales Tax

• Telephone Service Tax

• Entertainment Duty

• Hotel Accommodation Tax

• Consumption Duty (other than on alcoholic beverages, tobacco products and petroleum products which is covered under the Special Consumption Tax)

• Additional Stamp Duty levied on the importation of goods (except for in-bond shops, 'Protected" goods, alcoholic beverages, tobacco and petroleum products).

The GCT is a value added tax which is applied on the value added to goods and services at each stage in the production and distribution chain.  It is a tax on consumption and is included in the final price the consumer pays for goods and services.

The General Consumption Tax Act requires most businesses in Jamaica to:

• Register with the Taxpayer Audit and Assessment Department

• Charge and collect tax at 15% on all the standard-rated goods and services they supply

• Calculate for each taxable period net tax due/creditable and file GCT returns

Remit the net GCT collected to the Collector of Taxes (Inland Revenue Department) within 30 days or, in some cases 15 days following the end of each taxable period, or in other cases, at the direction of the Commissioner.

HOW THE GCT WORKS

The GCT is a tax based on consumption and is applied to each transaction through the production and marketing process.

Businesses which carry on an activity that is not exempt from GCT are required to file an application for registration.  Those persons whose total annual sales of goods and services are less than $144,000 for a twelve-month period will be registered as Registered Persons.

As such the business will be exempt.  That is, it will not collect GCT but will pay GCT on purchases of goods and services and not be eligible for credit.

Businesses whose total annual sales of goods and services are $144,000 and over for a twelve-month period are required to register as Registered Taxpayers, and will collect and remit GCT.  Registered Taxpayers who provide taxable goods or services will pay GCT on their purchases and charge GCT on their sales.  If the GCT charged is more than the GCT paid, the difference is to be paid to the Inland Revenue Department.  If it is less, the Registered Taxpayer may claim a credit/refund.

Registered Taxpayers are able to claim an Input Tax Credit for the GCT paid on business purchases (related to providing taxable goods and services).  The Input Tax Credit can be claimed for the materials and services purchased for further manufacture or for resale (including imports), purchases of capital property and any goods or services, such as office supplies, which are requirements to operate the business subject to tax.

In completing the GCT return, the taxpayer will be able to deduct his Input Tax Credit from GCT charged on sales.  In this way, the Input Tax Credit removes the GCT from the GCT from the goods or services until they are finally purchased by the consumer.

GCT In Operation

Under the GCT, most goods and services are taxed at fifteen percent (15%) except for motor vehicles.  Some, however, are taxed at zero percent (zero‑rated) and some are GCT‑exempt.  This means that Registered Taxpayers charge GCT at 15% on those items which attract the tax. Where goods and services are zero‑rated, Registered Taxpayers do not charge GCT on sales of these goods/services.  They are, however, able to claim an Input Tax Credit for any GCT paid on business purchases which are made in order to manufacture or provide these zero‑rated goods/services. (Zero‑rated supplies are listed in the First Schedule of the General Consumption Tax Act. (Appendix 1)

Where goods and services are GCT-exempt, no GCT is charged on these items.  However, unlike zero‑rated goods, Registered Taxpayers are not able to claim an Input Tax Credit on the purchases used to provide exempt goods and services.  Exempt supplies are listed in the Third Schedule of the Consumption Tax Act (Appendix 111)

Taxable periods or reporting periods will be based on the total annual sales of taxable goods and services.

Normally, the taxable periods will be monthly.  However, a Registered Taxpayer whose sales volume is below $1,000,000 may elect to file bimonthly, but may also elect to file monthly.

At the time of registration, taxpayers will be given a reporting schedule to follow for filing GCT returns.

PART 11

REGISTRATION FOR GCT PURPOSES

Who Is Required To Register ?

All persons engaged in a taxable activity are required to apply for registration under the GCT Act.

Who Is A Person ?

For purposes of GCT, "Person" means:-

·        An individual

·        A Company

·        A Partnership (which is defined to include an unincorporated body, a joint venture, a trustee or a trust).

What Is A Taxable Activity ?

A taxable activity is any activity carried on in the form of a business, trade, profession, vocation, association or club, which is carried on continuously or regularly by any person whether or not for a pecuniary profit, and involves, or is intended to involve, the sale/supply of goods and services in Jamaica, to any other person for a consideration.

NOTE: For GCT purposes it is not the business activity which is registered, but the person who conducts it.  The registration covers all the business activities of that person.

If the person conducting the business activity is an organisation (i.e., not an individual), it is the organisation which must apply for registration.

The individual members are not required to register.

The registration of a partnership is in the name of the partnership.

Exemption From Registration

Anyone engaged TOTALLY in the following will NOT have to register for GCT:--

1.      any activity carried on essentially as a private recreational pursuit or hobby;

2.      any engagement, occupation or employment under any contract of service or as a director of a company;

3.      any good or service which is exempt from the GCT (Third Schedule of the General Consumption Tax Act).

The Threshold

The Threshold is set at gross value of supplies of one hundred and forty-four thousand dollars ($144,000).  The Threshold amount is the consideration paid or payable on all supplies made.  Where a person is engaged in both taxable and exempt activities, the amount received from exempt supplies must be included when computing the gross value of supplies.

Who Is A Registered Taxpayer?

A person, whose gross value of supplies in the month of application and the eleven months immediately preceding the making of an application is not less than $144,000 or whose average monthly value of supplies in respect of a period less than 12 months is not less than $12,000, will be registered as a Registered Taxpayer.

Who Is A Registered Person ?

A person, whose gross value of supplies in the month of application and the eleven months immediately preceding the making of the application is less than $144,000 or whose average monthly value of supplies in respect of a period of less than 12 months is less than $12,000, will be registered as a Registered Person.

Voluntary Registration

A person who has applied for registration and qualifies for registration as a Registered Person may voluntarily apply to be registered as a Registered Taxpayer.  If the application is approved by the Commissioner all provisions of the Act and Regulations relating to Registered Taxpayers will apply to that person.

Benefits Of Being A Registered Taxpayer

When a person becomes a Registered Taxpayer, he will enjoy the following benefits under the GCT Act:

• Input Tax Credit - He will be able to claim a credit for GCT paid on his business purchases (input tax), whenever he supplies taxable goods.

• GCT Credits for Customers - Only a Registered Taxpayer can issue tax invoices to customers who are Registered Taxpayers so that these customers will be able to claim an input tax credit for purchases made.

REGISTRATION PROCEDURES

Applying For Registration

To apply for registration, a person must complete a GCT Application For Registration form - GCT‑ 1 (see Appendix IV).  The form may be obtained from a GCT office or a Collectorate. To be able to register for GCT, a person must have a valid Business Enterprise Number (BENO).  Where an applicant does not have a valid BENO, he must apply for both BENO and GCT registration.  The application form for BENO (BENO 1) may be obtained from a GCT office, a Collectorate, or the BENO office.

Any person starting a taxable activity after the 22nd October 1991 has twenty‑one (21) days after starting this taxable activity to make an application to register.

Failure to apply for registration, makes you liable to a penalty equal to:

(a)    two hundred dollars ($200) for each complete month of the period of non‑registration in the case of a person liable to be registered as a Registered Person;  OR

(b)   thirty percent (30%) of the tax which otherwise would have been payable for the period of non‑registration in case of a person liable to be registered as a Registered Taxpayer.

Instructions for Completing Application Form (GCT‑ 1)

Instructions for completing the application form are provided at the back of the form.  A sample application form is included in Appendix IV

POST-REGISTRATION PROCEDURES

What Happens Next ?

Where the Commissioner is satisfied with the details on the application for registration (GCT‑1) he will register the person and issue a Notice of Registration in respect of a person operating below the Threshold.  In respect of a person operating above the Threshold, he will issue a Certificate of Registration.  A person operating below the Threshold will receive a Notice of Registration and is not permitted to collect General Consumption Tax when he supplies goods or services.

Certificate of Registration for the Registered Taxpayer

The Certificate of Registration issued to Registered Taxpayers (see Appendix IV) shows the GCT Registration Number and the effective date of registration.

A Certificate of Registration or an official copy of the certificate must be prominently displayed in each business outlet.  If a person operates his business from two or more locations, he must inform the GCT Department of this at the time of application for registration and he will be issued with the required number of official copies of certificates.

These certificates must not be photocopied.

If a Registered Taxpayer does not display the certificate or official copies of the certificate, or if any person displays a Certificate of Registration not issued by the Department, an offence is committed under the GCT Act.

Obligations Of A Registered Taxpayer

A Registered Taxpayer has certain obligations to fulfill.

These include:

·        Issuing tax invoices as required under the GCT Act and Regulations;

·        Collecting the appropriate tax in respect of the goods and services which he supplies;

·        Keeping proper books and records and producing them, if required by an authorized person;

·        Making regular re on the prescribed form whether or not he makes a taxable supply during the tax period;

·        Paying the amount of tax payable in respect of the taxable period to which the return relates;

·        Advising the Commissioner in writing of a request to cancel registration, or of a change of status, or ownership of the business or business address; and

·        Upon ceasing a taxable operation, filing a final return for the last taxable period.

Note: All liabilities and obligations incurred while being a Registered Taxpayer are not affected by ceasing to be registered.

CANCELLATION OF REGISTRATION

The Commissioner may cancel the registration of a Registered Person if he is satisfied that the person no longer carries on a taxable activity.  He may also cancel the registration of a Registered Taxpayer if he is satisfied that the Registered Taxpayer no longer qualifies for registration as such.

Before cancellation, the Commissioner will notify the Registered Person or Registered Taxpayer of his intention, stating the reason.

Any person notified of a proposed cancellation may object.  This objection must be made within thirty days of the date of service of the notice and must be in writing, stating precisely the grounds of the objection.

If the Commissioner, after consideration of an objection decides to cancel a registration, he must inform the person in writing of the decision and of the right of appeal.  Where the person is a Registered Taxpayer, he must return the Certificate of Registration to the Commissioner when notified of the decision.

NOTIFICATION OF CHANGE

Every person who is registered is required to inform the Commissioner in writing within twenty‑one days‑

(a)    of any change in business address, or any change in the name in which the business is carried on;

(b)   of the sale by him of his business or part thereof, stating the date on which ownership is transferred and the name and address of the new owner or part‑owner.

A person who acquires a taxable activity or part thereof from a Registered Taxpayer is required to inform the commissioner in writing within twenty‑one days of the date of acquisition.

PART 111

CHARGING GCT

A Registered Taxpayer is liable to account for GCT on taxable supplies he makes within Jamaica on goods and services.  Therefore, to ensure that GCT is correctly charged, the Registered Taxpayer must be aware of the following:

(a)    what is a taxable supply:

(b)   the place of supply:

(c)    the time a supply is considered to take place;

(d)   the value of a supply on which GCT is to be calculated;

(e)    the rate of GCT to be applied on each supply; and

(f)     GCT on imported goods and supply

TAXABLE SUPPLY

A taxable supply is a supply of goods and services made in the course of or furtherance of any business that is not exempt from GCT by law.

PLACE OF SUPPLY

The place of supply is important as only supplies made or deemed to be made in Jamaica are chargeable on tax.  Exports are subject to tax at a rate of zero‑percent.

A supply of goods or services is considered to be made in Jamaica-

(a)    if the supplier is resident in Jamaica; or

(b)   if the supplier is not resident in Jamaica

            (i)         in the case of goods; the goods are in Jamaica at the time of supply; or

            (ii)        in the case of services, the services are performed or utilized in Jamaica.

The circumstances in which goods or services exported are zero-rated are as follows:

(a)    goods which have been entered by the supplier for export pursuant to the Customs Act and which have been exported and in respect of which a customs certificate of exportation has been issued;

(b)   services which are supplied to a person who is not resident in Jamaica and the benefit of the supply of which is not realized in Jamaica.

TIME OF SUPPLY

Except as otherwise provided in the GCT Act or Regulations made under the Act, a taxable supply takes place when:

(a)    an invoice for the supply is issued by the supplier; or

(b)   payment is made for the supply; or

(c)    the goods are made available or the services are rendered, the case may be, to the recipient, whichever first occurs.

When goods are supplied:-

(a)    under an agreement for hire purchase; or

(b)   under an agreement whereby the recipient has  an option to return the goods to the supplier the supply takes place when the goods are made available to the recipient .

Special rules exits where:-

(a)    the goods or services are supplied progressively or periodically under an agreement.  In these cases the time of supply is the earliest of

·        an invoice is given

·        payment is made

·        payment becomes due

(b)   a contract provides for the retention by the recipient of part of the purchase price pending satisfactory completion of the contract or part thereof.  In this case the tax become payable when payment become due or is made, whichever is earlier.

(c)    a Registered Taxpayer, by means of a machine meter or device operated by a coin or token, makes a taxable supply for a consideration in money.  The tax becomes payable when the coin or token is removed from the machine, meter or device.

(d)   a taxable supply is made by an insurer pursuant to a contract of insurance other than a policy of life insurance, health insurance or re-insurance.  The tax becomes payable when payment is made to a broker or insurer for that supply.

VALUE OF SUPPLY ON WHICH GCT IS TO BE CALCULATED

The value of a taxable supply other than an imported taxable supply shall be determined in the following manner:-

(a)    if the consideration for the supply consists wholly of money, the value shall be  consideration (excluding General consumption Tax); or

(b)   if the supply is for consideration partly consisting of money, then the value of the supply shall be deemed to be open market value; or

(c)    if the supply is not the only matter to which the total consideration applies, the value of the supply shall be taken as that part of the consideration applicable to the supply; or

(d)   if there is not consideration for the supply, the value of the supply shall be the cost incurred by the Registered Taxpayer in acquiring that supply; or

(e)    if the consideration for the supply is payable by a connected person, the value of the supply shall be taken to be its open market value.

The value of a taxable supply imported into Jamaica by a Registered Taxpayer shall be the aggregate of:‑

(a)        the value of that taxable supply for customs duty purposes;

(b)        the amount of customs duty payable;

(c)        any additional stamp duty on inward customs warrants; and

(d)        any special consumption tax payable in respect of that taxable supply.

The value of a taxable supply imported into Jamaica for personal use and not for resale by any person who is not a Registered Taxpayer shall be the aggregate of:‑

(a)        the value of that taxable supply for customs duty purposes;

(b)        the amount of customs duty payable;

(c)        any additional stamp duty on inward customs warrants; and

(d)        any special consumption tax payable in respect of that taxable supply.

The value of a taxable supply imported into Jamaica for resale and not for personal use by any person who is not a Registered Taxpayer shall be the aggregate of:‑

(a)        the value of that taxable supply for customs duty purposes;

(b)        the amount of custom duty payable;

(c)        any additional stamp duty on inward customs warrants;

(d)        any special consumption tax payable in respect of that taxable supply; and

(e)        such percentage of the total value of (a), (b), (c) and (d) as may be determined by the Commissioner, having regard to the price which the supply would fetch on a sale made by a retailer on the open market.

Rates Of General Consumption Tax To Be Applied To Each Supply

Taxable supplies are taxed at a rate depending on the nature of the supply.  There is a standard rate of 15%, which is the rate applied to all goods and services except those that are taxed at zero percent or chargeable at a specified rate, for example, tax on motor vehicles.  The goods and services which attract a rate of zero percent are listed in Appendix 1.  The rates applicable to motor vehicles are listed in Part 1 of the First Schedule of the GCT Act.

Where goods or services are taxed at zero percent, a Registered Taxpayer will not charge GCT on supply of these goods or services but he will be able to claim an Input Tax Credit of any tax paid in relation to the supply of these goods or services.

GCT On Imported Goods And Supply

General Consumption Tax (GCT) is levied and collected at the time goods are entered for home consumption under the Customs Act.  The person importing the goods is liable to pay the GCT to Customs on the same document which is used to pay the Customs Duty.

Supply for the purposes of the GCT Act includes:‑

(a)    the sale, transfer or disposition of goods by a Registered Taxpayer so that the goods sold, transferred or otherwise disposed of no longer form part of the assets of a taxable activity;

(b)   the exercise of a power of sale by a person ‑other than a registered taxpayer in satisfaction of a debt owed by a Registered Taxpayer; and

(c)    the provision of services.

PART IV

KEEPING RECORDS AND ACCOUNTS

Legal Requirements

Section 36 of the General Consumption Tax Act requires every Registered Taxpayer to:

(a)    keep accounts, books and records as may be prescribed;

(b)   produce relevant accounts, books and records whenever and wherever they are required to do so by an authorised person;

(c)    produce any other information as may be required by an authorised person or as may be prescribed.

Records And Books To Be Kept

A Registered Taxpayer is required to keep books and records, in English, at his principal business place in Jamaica; or at any other place and on any terms and conditions specified by the Commissioner in writing.  In the case of persons who file returns separately for branches or divisions, accounting records must be kept at these branches or divisions.

The records must be kept in a form, and contain information, which will enable you and the authorities to determine your liabilities and obligations under the Act; or the amount of any rebate or refund to which you are entitled.

The records must be completely up‑to‑date and must easily relate to the figures shown on the return for each taxable period. Examples of the books and records include:

·        Purchases and Sales Books

·        Purchase Invoices/Import and Export Documentation

·        Sales Invoices, Services Billings Invoices

·        Credit or Debit Notes

·        Income and Expenditure Records

·        Cash Register Tapes

·        Copies of GCT Returns

·        Charts and Code of Accounts

·        Purchase Orders Stamped as Zero‑rated by GCT Officers

·        Accounting Instruction Manuals

·        A GCT Account and a Special Consumption Tax Account or both

·        System and Programme Documentation which describes the Accounting System maintained on a Computer including computer tapes, computer disks, and microfilm

·        Bank Statements

·        Tax Invoices

Retention Of Records

Registered Taxpayers must keep these books and records for at least six years from the end of the taxable period to which they relate.

Where the accounts are kept by means of a computer record, all documents, disks, cards and tapes are to be stored in a manner so as to preserve all such information.  All changes made and the dates they were made should be noted in chronological order.

Goods Given Away, Taken For Personal Use Or Diverted To An Exempt Activity

Registered Taxpayers must keep a record of goods given away, transferred to non‑taxable activities or taken for own use if these goods have been acquired or produced in the course of carrying out taxable activity and account for tax on same.  These records must provide the following information:

·        description and quantity of the goods;

·        date they were taken from stock;

·        the cost of the supplies and the tax to be paid on it.

Exports

Where goods are exported the Registered Taxpayer is required to hold evidence that the goods have been exported.  This will include, for example:

·        Contracts

·        Copies of invoices

·        Freight and packing details

·        Customs export documents

·        Evidence of payment for supply

If you supply services to a person who is not resident in Jamaica or who realizes the benefit of the supply outside of Jamaica, then those services are zero‑rated.

For each taxable period, it is recommended that Registered Taxpayers summaries the records of output tax due and payable (including tax on any goods taken for own use) and payments or repayments by the Department and input tax paid on purchases, services as well as tax in respect of bad debts and credit notes.

These summaries should be entered in a special book or ledger account to be known as the GCT Account.  A copy of the GCT Return filed with the GCT Department should be retained as part of your records as part of the records of the business.

AN EXAMPLE OF A GCT ACCOUNT

Tax Period from 1 April, 1992 to 30 April 1992

Contents Of Records

The books and records should contain the following:

·        A record of all goods and services supplied or received

·        The names of suppliers or their agents, in sufficient detail to enable the Commissioner to readily identify the goods and services provided by them

·        All invoices, tax invoices, credit notes and debit notes relating thereto

·        A book or books containing entries from day to day in sufficient detail relating to all cash received and cash paid

·        Annual stocktaking record

Credit Or Debit Notes

Where the Registered Taxpayer has issued a tax invoice and made a return and

(1)   the supply is subsequently canceled,

(2)   the terms or transaction altered,

(3)   the value of the supply is incorrectly calculated or stated on a tax invoice,

(4)   the tax is incorrectly calculated, or

(5)   the goods or services are returned to the supplier,

the Registered Taxpayer should give the recipient a credit or debit note as appropriate.  Such notes should be clearly marked Credit or Debit as the case may be and contain information similar to that required for a tax invoice.

Copies of Credit or Debit notes should be clearly marked "COPY" at the top of the note.  The Registered Taxpayer issuing or receiving a Debit or Credit note must retain a copy of it.

What Is A Tax Invoice ?

·        All Registered Taxpayers must issue a Tax Invoice to all other Registered Taxpayers to whom taxable goods or services are supplied.

·        The tax invoice, which should be pre-numbered, must show the:-

·        Words "Tax Invoice" (shown prominently)

·        Date of the taxable supply

·        Serialised number of the tax invoice

·        Name, address and GCT registration number of the Registered Taxpayer issuing the invoice

·        Name and address of the Registered Taxpayer to whom the taxable supply is made

·        Quantity and description of the taxable supply

·        Amount of the consideration payable on the taxable amount

·        Rate of tax and the amount of tax payable

·        Total amount of the consideration and the GCT.

Therefore, a Tax Invoice is simply your normal commercial bill or invoice with four additional pieces of information:

·        The words "Tax Invoice"

·        Your GCT registration number

·        The rate and amount of GCT applicable

·        The total value of the invoice including GCT.

It is important to note that:

·        Only one tax invoice is to be issued in respect of a supply

·        A tax invoice must be issued within 7 days of a supply

·        A tax invoice must be prepared for goods taken for own use and marked "Own Use"

·        A replacement invoice should be clearly marked "COPY" and signed by the Registered Taxpayer issuing it.

An Example of A Tax Invoice

FROM:            Fabric World                            TAX INVOICE NO:101

                        8 Leinster Road                        GCT Reg. No: 006840

                        Kingston 5                                Date: 12 December 1991

To:       Vogue Limited

                        23 Fifth Ave.

                        Kingston

            EXAMPLE OF A TAX INVOICE