Article by: Lonehill Accountant: Jean Claude Marais
The Binding General Ruling 65 (BGR65)
Many businesses in South Africa still use Cash as a method of payment, especially in the SME market, such as small grocery shops and retail establishments. These businesses were affected by the decision of the reserve bank to discontinue the minting of certain coins, such as the 1c (2002) and 5c (2012). This resulted in these shops implementing rounding, usually in favour of the customer.
This is also the case with Cash Suppliers. From an accounting perspective, this has caused a discrepancy between the amount paid and the amount charged by the supplier, which then affects the VAT (Value-Added Tax). However, Section 21 of the Value-Added Tax Act 89 of 1991 allows for various adjustments if supporting documents, such as credit notes, are supplied unless it is impractical to do so.
The ruling states that credit notes need not be issued in respect of rounding, subject to certain conditions as per the ruling. This is also true for input tax, which can be adjusted in relation to the rounded cash amount paid.
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