Value Added Tax (Vat)-How to treat goods remaining in stock on January 1, 2013


Vat is applicable at the rate of 15% (same as the GST rate) and is applied on most imports and on goods and services bought and consumed in Seychelles other than those specifically exempted under the Vat Act.

There is concern that tax will be charged twice on the same goods in view that GST would have been paid on the goods purchased prior to December 31, 2012 and Vat will apply on the same goods if still in stock on January 1, 2013.

In one of our previous articles we explained the GST deduction mechanism for importers on goods which GST was paid directly at the point of entry at Customs.

You will recall that as a transition rule, GST paid on goods directly imported by Vat registered businesses, before the introduction of Vat and remaining in stock as at December 31, 2012, can be offset against Vat collected if the following conditions are met:

• The goods are used for business purpose;

• The goods are used for making taxable supplies;

• The same goods are not exempted under Vat (and were not exempted from GST);

• There are satisfactory documents to prove to the Seychelles Revenue Commission (SRC) that GST has been paid.

In today’s article we will look at the retailers that have purchased their goods locally rather than imported directly.

What will happen to retailers that did not import directly but rather purchased their goods locally?

As there was no GST on the domestic sales of goods, for Vat-registered retailers who purchased goods for resale on the domestic market, there is no GST on the invoices issued by the suppliers.

 However, prices while expressed GST free, have potentially a GST component which is the GST paid at the point of entry at Customs and passed on the retailer (customer) by the importer/wholesaler (supplier).

This GST component has to be neutralised to avoid a cascade of tax on tax - in other words the application of the Vat on the GST.

The GST is neutralised by a notional credit mechanism.

How does the notional credit mechanism work?

The notional credit mechanism is a transitional measure put in place to avoid any potential price increase by retailers that would have indirectly paid GST on goods in their shop.
Retailers registered for Vat by January 1, 2013 will be exceptionally allowed to deduct a notional credit of 10% on the price of all taxable(*) goods — purchased locally and remaining in the handling stock on December 31, 2012 — as mentioned on the invoice issued by their local supplier.

(*) GST exempted goods are excluded from this mechanism.

This deduction will be made according to the general conditions prescribed for GST on imported goods.  It will be a one-off deduction made on the first Vat return due for February 21, 2103 for compulsory Vat-registered businesses (or by April 21, 2013 for voluntary Vat registered taxpayers).
For example: During 2012 a retailer A has purchased from a local wholesaler B the following taxable goods that remain unsold on December 31, 2012.

The inventory reflects the following:

-          10 packs of detergent  SCR4,000 invoiced July 10, 2012 
-          250 bottles of wine SCR30,000 invoiced September 23, 2012
-          17 packs of aluminum paper SCR3,500 invoiced November 2012
-          30 toys for kids SCR12,000 invoiced December 11, 2012.
Total amount charged for these goods (4,000+ 30,000+ 3,500 + 12,000)= SCR49,500.

Notional credit allowed as an input tax credit 49,500 x 10% =  SCR4,950

What are the conditions for the notional credit?

To be able to claim the notional credit, the following condition applies:

• The physical inventory is accurate and documented,

• All goods locally purchased and in stock are justified by a proper invoice issued by a local supplier (importer/wholesaler). SRC will verify the accuracy of these deductions; documents must be available upon SRC’s request,

• These goods are not Vat exempted.

When will the notional credit be deducted?

The GST is deductible from Vat collected on sales on the first Vat return which should be remitted to SRC on or before February 21, 2013 for compulsory registered businesses and on or before April 21, 2013 for voluntary registered businesses. 

The deduction should be reported on line 7 [adjustment (+ or -)] of the Vat return.

For more information

You can contact Seychelles Revenue Commission on 4293745 or email us at This email address is being protected from spambots. You need JavaScript enabled to view it. .      The Value Added Tax Act, 2010 is available on the Seychelles Revenue Commission website (


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