Finance Act: MAN DG seeks transitional guidelines for smooth conversion

Finance Act: MAN DG seeks transitional guidelines for smooth conversionThe Manufacturers Association of Nigeria (MAN) has called for transitional guidelines that would ensure smooth conversion from the pre-Finance Act laws to the changes introduced in the new Act.
The Director-General(D-G) of MAN, Mr Segun Ajayi-Kadir, made the call in a statement released on Thursday in Lagos.
Ajayi-Kadir said that the call for the guideline was attributable to the peculiarity of business operations in the sector where the basis of revenue recognition was different from when sales and payment was received on items of goods produced.
He suggested that the guidelines should provide practical terms on how to deal with and apply the change to the standard VAT rate from the effective date based on common taxpayers’ question.
“There is usually a time lag between when customers make payments for sale orders and when the goods are made available to them.
“This means that there will be significant instances of undelivered sales at the prevailing VAT rate of 5 per cent when the Law was signed, and when the new VAT rate increase will take effect.
“We therefore feel that the sales order issued and paid prior to the effective date be invoiced at the current VAT rate of 5 per cent even after the effective date, while sales orders issued after the effective date be invoiced at the new VAT rate,” he said.
The MAN DG raised concerns over the implication of the 2.5 per cent increment in Value Added Tax (VAT) as contained in the new Finance Act.
He described the Act as a positive initiative, saying that it streamlined tax laws into a single document, supported small businesses as well as offered incentives for investment in infrastructure.
According to him, specifically, the concern is embedded in the implications of the increase in Value Added Tax from 5 per cent to 7.5 per cent for manufacturers.
The D-G said that the increase in VAT was a sore point in the otherwise progressive movement that the Financial Bill represented in the tax system.
“Nothing in the arguments adduced for the increase has controverted the fact that it is ill-timed and would negatively impact the producers and the consumers.
“It is also an unexpected turn in the efforts of government to improve the competitiveness of the manufacturing sector and alleviation of diminishing standard of life of the average citizens.
“You see, it is a consumption tax and the increase would constrain consumption and eventually negatively impact production.
“So, it will constitute a drag on the performance of the manufacturing sector and add to a possible decline in the growth of economy.
“Already our warehouses are stacked up with high inventory of unsold goods due to unprecedented buyers apathy,” he said.
Ajayi-Kadir said he had expected that government focused on ensuring policies that would engender circulation of funds to enable citizens make more purchases and improve overall wellbeing.
However, seeing that government has gone ahead with the policy, the Director-General stressed the need to pay attention to the challenges that might be associated with the commencement of implementation