On 9 February 2024 the Government of Zimbabwe promulgated Statutory Instrument 15 of 2024, which exempts the supply of certain goods and services and the importation of certain goods from the payment of Value Added Tax (VAT). This Statutory Instrument amended the Value Added Tax (General) Regulations, 2003 (Statutory Instrument 273 of 2003).

The result is that the supply of certain goods and services which would otherwise be subject to VAT, have now been exempt in terms of Section 11 (j) of the VAT Act [Chapter 23:12], which states that:

The supply of any of the following goods or services shall be exempt from the tax imposed in terms of [this Act]… as are prescribed in Regulations made in terms of section seventy-eight of the VAT Act.

Statutory Instrument 15 of 2024 is split into two parts, namely Part 1 and Part 2. Both Parts also include commodity codes for certain goods, which means that only those goods which fall under the specific codes will be exempt from VAT.

Part 1 of Statutory Instrument 15 of 2024 lists the exempted goods and services. The result is that when supplying these goods or services locally, VAT will not be levied on such supply. These goods and services include the following:

1. Water supplied through a pipe for domestic use.
2. Supply of domestic electricity.
3. Rates charged by a local authority.
4. Items of agricultural equipment or machinery which fall within the specified commodity codes.
5. Fuel and fuel products which fall within the specified commodity codes.
6. Ethanol fuel under commodity code 2207.10.10.
7. Road toll fees collected by the Zimbabwe National Road Administration established in terms of the Road Act [Chapter 13:18].
8. Tobacco supplied on the auction floors in terms of the Tobacco Industry and Marketing Act [Chapter 18:20], commission charges on tobacco sales at auction floors, and other tobacco not sold on the auction floor referred to in the specified commodity codes.
9. Other goods and agricultural produce (excluding live animals and products thereof, except where specifically provided) which fall within the specified commodity codes.
10. Ancillary services supplied by National Pharmaceutical Company (Nat Pharm) including storage, handling and distribution.
11. Goods and services provided by Medical Statutory Bodies.
12. Sanitary wear and sanitary products under the specific commodity codes.
13. Specified animal feed and animal remedy.
14. Specified fertilisers and pesticides.
15. Specified plants and seeds.
16. Any goods and services supplied to the President of the Republic of Zimbabwe.

Part 2 of Statutory Instrument 15 of 2024 lists the goods which are exempt from VAT when importing and relates to goods imported into Zimbabwe which fall under any item or heading as contemplated in the Customs and Excise Act [Chapter 23:02], regardless of whether or not customs duty is payable or a rebate of customs duty is granted in terms of the Customs and Excise Act [Chapter 23:02].

Although customs duty and other importation costs will still apply, the portion of the customs tax which would have been attributed to VAT will no longer apply resulting, in importation becoming cheaper. The goods include:

1. Goods for the exclusive use of:

1. 1. Governments other than the Government of Zimbabwe;
   2. Foreign diplomatic missions and other international representatives designated by the Minister responsible for foreign affairs;
   3. the Head of State of Zimbabwe;
   4. the former Heads of State of Zimbabwe; and
   5. the Government of Zimbabwe, covered by a Government Duty Free Certificate issued by the Secretary of the Ministry concerned.

2. Travellers’ cheques and bills of exchange, denominated in foreign currency.
3. Importation of electricity.
4. Publications and other advertising matter relating to fairs, exhibitions and tourism in foreign countries.
5. Any of the following items imported into Zimbabwe:

1. 1. Human remains;
   2. Goods imported under an international carnet;
   3. Goods temporarily imported in terms of section 124 of the Customs and Excise Act [Chapter 23:02]; and
   4. Goods which, in the opinion of the Commissioner of Taxes, are of no commercial value.

6. Goods imported into Zimbabwe for conveyance to any export country (Transit Goods).
7. Items of agricultural equipment or machinery under the specified commodity codes.
8. Fuel and fuel products falling within the specified commodity codes.
9. Tobacco items falling with the specified commodity codes.
10. Goods and services imported by the Medical Statutory Bodies.
11. Specified sanitary wear and sanitary products.
12. Specified Agricultural inputs.
13. Goods imported under a rebate prescribed by the Minister in terms of section 120 as read with section 235 of the Customs and Excise Act [Chapter 23:02].
14. Supply of goods for use by physically challenged persons with the following Commodity Codes:

Impact

Some of the potential benefits of Statutory Instrument 15 of 2024 include:

1. The lowering of prices for goods which are necessary for day-to-day survival including water, electricity, sanitary wear and agricultural products, particularly for lower income households.
2. Increased competition, as new manufacturers and products are able to enter the market as decreased prices encourage consumer spending and boost demand for goods.
3. Increased imports, as lower import prices allow for more goods to enter the country thereby boosting economic activity in sectors that rely on imported inputs as well as increasing access of goods to consumers.
4. Encouraging domestic production to reduce prices and compete with the lower import prices. To remain competitive, domestic producers will need to increase efficiency and reduce costs, potentially leading to increased domestic production and increased access to goods for consumers at lower prices. This should encourage domestic producers to innovate and update their methods of production, which should lead to skills development in not only the manufacturing of those goods but generally across all manufacturing sectors. However, this may also have an inverse implication on domestic production, as domestic manufacturers may be unable to reduce production costs and compete with lower import prices forcing domestic producers to cease operations.

Conclusion

Statutory Instrument 15 of 2024 exempts the supply of certain goods and services and the importation of certain goods from the payment of VAT. This has the potential of increasing access to goods necessary for day-to-day survival at lower costs to consumers and boost economic activity by increasing consumer spending. It will also allow for more players to enter the market and encourage cost efficient and innovative domestic production. However, goods becoming cheaper as a result of cheaper importation costs may have the result of forcing local producers to cease operations if they cannot reduce operating costs and lower the prices of goods and services to compete with cheaper imports.