5% VAT applies to contracts before February 1, says Government

Isola Moses | ConsumerConnect

Contrary to earlier insinuations in certain quarters that implementation of the new 7.5 % is all-embracing, and applies to all products and services being transacted in the economy after it came law, the Federal Government of Nigeria has said it yet retains 5 percent Value Added Tax (VAT) for contracts awarded before February 1, 2020.

It was learnt that Malam Garba Shehu, Senior Special Assistant to the President on Media and Publicity, while addressing State House correspondents after the latest Federal Executive Council (FEC) meeting Wednesday, March 11, disclosed that the report of a Cabinet Committee on the effective date for the commencement of 7.5% VAT on government contracts has been approved.

Malam Shehu said the FEC had given approval that only fresh contracts signed from February 1, 2020, going forward would attract 7.5% VAT, whereas those contracts earlier signed on 5% VAT before February 1 would remain at 5%.

“By law, the new VAT came into effect on 1st of February, 2020. Government had worried about the implications of this on contracts that had been issued earlier than this year.

“So, the contracts that are being handled by various ministries, particularly Ministry of Works for instance, are coming from many years back.

“So, should the VAT on those contracts be 7.5% or 5% as earlier signed on to?

“A final decision was reached today (Wednesday, March 11). This is that new contracts that are signed from February 1, going forward will attract 7.5% VAT.

“Contracts earlier than February 1 signed on 5% VAT will remain at 5%. So, there is no more confusion on this matter,” the Presidential spokesman stated.

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