By Habeeb Ibrahim
The Federal Government has taken a significant step towards easing financial pressure on Nigerians with a new bill aimed at exempting essential products and services from Value Added Tax (VAT).
The proposed legislation, designed to reduce costs for both manufacturers and consumers, focuses on a range of critical goods, including baby products and locally produced sanitary towels, pads, and tampons.
This move is intended to make these essential items more affordable and accessible, especially for women and families.
The bill, titled “A Bill for an Act to Repeal Certain Acts on Taxation and Consolidate the Legal Frameworks relating to Taxation and Enact the Nigeria Tax Act to Provide for Taxation of Income, Transactions, and Instruments and Related Matters,” also provides VAT exemptions for military and security-related supplies.
This includes hardware, arms, ammunition, and locally manufactured uniforms supplied to the military, paramilitary, and other security agencies.
Notably, the bill extends tax relief to sectors vital to the country’s economic stability and public welfare. In the oil and gas sector, exports, including crude petroleum and feed gas, are VAT-exempt. Humanitarian projects funded by donors also qualify for VAT exemptions, though these organizations will initially pay the VAT and later apply for refunds.
Transportation costs are another focus of the bill, with shared passenger road transport services being exempt from VAT, a move likely to alleviate commuting costs for many Nigerians.
Agricultural activities are also supported, with VAT relief on the purchase, hire, or lease of farming equipment, such as tractors and ploughs, provided these tools are used for agricultural purposes.
Diplomatic and educational institutions are not left out. Goods and services provided to diplomatic missions, diplomats, and entities under the Diplomatic Immunities and Privileges Act will enjoy VAT exemptions, as long as their activities are non-profit. Similarly, school plays and performances tied to educational purposes are VAT-free under the proposed law.
The bill also highlights exemptions for government licenses, land or buildings, and financial instruments, including money and securities. Additionally, supplies within export processing or free trade zones are VAT-exempt, as long as they are used for approved activities.
However, the bill grants the Minister of Finance the power to impose VAT on any of the exempt items by issuing an order published in the official gazette. This provision ensures flexibility in tax policy should economic conditions change.
