The Ministry of Commerce, Manufacturing, Business Development, Cooperatives and Consumer Affairs welcomes the implementation of the zero-rating of the Value Added Tax (VAT) on a carefully selected list of essential items, from August 2nd, 2025 to May 31st, 2026.
The policy measure forms part of ongoing efforts by the government to alleviate financial strain on consumers and enhance household affordability, amidst significant shifts in the global trade landscape.
This zero-rating initiative means that the 12.5% VAT previously applied to these products will now be reduced to 0%, allowing retailers to pass the full benefit of the tax relief on to consumers. This measure directly targets the rising cost of living by reducing prices at the point of sale and making essential goods more accessible to all, particularly the vulnerable.
It is important to note the distinction between zero-rating and the exemption of VAT:
- Zero-rated goods are still subject to VAT, but at a rate of 0%. This means that suppliers can claim VAT refunds on inputs used to produce or distribute the item, which helps to reduce operational costs and further lower retail prices.
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- Exempt goods, on the other hand, are not subject to VAT, but businesses supplying exempt goods cannot claim input VAT. This often results in hidden costs being passed on to the consumer.
By opting for zero-rating over exemption, the government ensures that not only are these items VAT-free at the consumer level, but that businesses can also benefit from reclaiming VAT on their inputs—resulting in a more efficient and transparent system that benefits end users.
Director of Consumer Affairs Mrs. Wendy Frederick has assured that the prices of the items impacted by this measure will be closely monitored prior and post implementation of the zero-rating. Complaints and Investigation Officers from the Consumer Affairs Department are currently out in the field collecting data island-wide.
Source – Ministry of Commerce
