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Wednesday, July 17, 2024

VAT cut to affect price controls on some goods and services: VCCI

By Thai Huy

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HCMC – The Vietnam Chamber of Commerce and Industry (VCCI) has raised concerns that the reduction of value added tax (VAT) will impact the prices of certain goods and services that are subject to government price controls, if detailed guidance is not provided.

The Government currently applies price controls on various goods and services, including the definition, registration, declaration, and listing of prices. Therefore, when the VAT reduction from the curent rate of 10% to 8% takes effect on July 1, 2023, followed by an increase to 10% on January 1, 2024, the adjustment in VAT would affect the implementation of price control measures.

Businesses and experts are uncertain whether they should reduce prices in proportion to the two-percentage-point VAT reduction, especially if they have already declared and registered prices inclusive of VAT, according to VCCI. There is ambiguity regarding the requirement to declare and register revised prices.

While prices of some goods and services can easily be revised in accordance with the VAT reduction, making a minor price adjustment of 2% on other goods and services that were previously rounded for convenience of payment may not be practical.

In light of these concerns, VCCI has written to the Ministry of Finance, urging them to provide additional guidance on goods and services under price controls that are eligible for the VAT cut. VCCI has also proposed that businesses not be required to amend prices and be allowed to continue applying registered prices.

Many businesses have shared their difficulties with VCCI regarding the complex classification of goods and services eligible for 8% or 10% VAT, as stipulated in Decree 15. This classification poses risks for enterprises as they lack clarity on how to categorize them.

Tax and customs authorities are also grappling with the classification of goods and services in practice, leading to inconsistent interpretations of regulations. This inconsistency could cause inconvenience for businesses during inspections by competent authorities.

Therefore, enterprises have suggested using the classification of goods imported to Vietnam in accordance with customs law, instead of relying on the Vietnam Standard Industrial Classification. This change would make it easier to determine tax rates for imported and domestic goods. Alternatively, VCCI has proposed a comprehensive list of HS codes for imported goods eligible for 10% VAT.

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