Question Three [30 Marks]

Assume that you are a trainee Accountant working for the KTM Chartered Accountants. Garrison Limited is one of your clients which operate two branches in the country, Ghanzi branch and Matebele Branch. Ghanzi branch makes taxable supplies only while Matebele branch makes exempt supplies only.

The company estimates that taxable supplies make up around 70% of its gross sales while exempt supplies make up about 30% of its turnover. Garrison Limited management is of the view that the company is not able to recover most of the VAT input. Due to this concern, management is wishes to get your advice on how it can maximase the recovery of VAT input

Garrison is considering importing some goods and services from China but is not sure of VAT implications of those goods and services.

Garrison has also formed a property construction division which is negotiating the purchase of immovable property from a VAT registered trader and from non-VAT registered seller.

You have been provided with information about the company in Exhibit 1

Exhibit 1

VAT Issues

1. Branch information

Garrison Limited has a single VAT registration for its two branches, Ghanzi and Matebele. Information about the branch supplies, with amounts shown exclusive of VAT for the month of September 2023 is given below:

1. Sales

	Ghanzi (P)	Matebele (P)	Total (P)
Sales: Standard-rated Zero-rated Exempt	4,560,000 2,150,000 -	- - 2,957,152	4,560,000 2,150,000 2,957,152
Total sales	6,710,000	2,957,152	9,667,152

1. Purchases

	Ghanzi (P)	Matebele (P)	Total (P)
Purchases: Standard-rated purchases attributable to standard-rated sales Standard-rated purchases attributable to zero-rated sales Exempt purchases attributable to standard-rated sales Standard-rated purchases not allocated Standard-rated purchases attributable to exempt sales Exempt purchases attributable to exempt sales	1,900,000 860,000 475,000 1,500,000 - -	- - - 340,000 900,000 300,000	1,900,000 860,000 475,000 1,840,000 900,000 300,000
Total sales	4,735,000	1,540,000	6,275,000

1. Projected importation of services and goods for the next 12 months will be as follows:

Importation of goods for business P1,350,000

Importation of services for business P661,000

1. Purchase of immovable properties

• The first property is a warehouse in Francistown from Dred Holdings Ltd for P2,560,000 excluding VAT. Dred Holdings Ltd is registered for VAT
• The other property is an office building from Marang Investments for P1,800,000 excluding VAT. Marang Investments is not registered for VAT.

Required

1. Calculate VAT payable or refundable by Garrison Limited for the month of September 2023. (10 marks)
2. Advise Garrison Limited on how it may maximize the recovery of its input VAT in respect of its branches where appropriate (10 marks)
3. Discuss the VAT implication of the importation of goods and services. Support your answer with appropriate calculations. (5 marks)
4. Discuss the VAT implications of the acquisition of immovable property in the exhibit above. (5 marks)

[Total: 30 Marks]