TRA appeals against 800m/- Tanga Cement case ruling

The Commissioner General of the Tanzania Revenue Authority (TRA) has appealed against a decision by the Tax Revenue Appeals Tribunal in favour of Tanga Cement Company Limited over the payment of 800m/-.

In the appeal, the TRA chief is asking justices of the Court of Appeal to quash the whole decision given by the Tribunal on October 18, last year, under the Chairmanship of High Court Judge Fauz Twaib and all other orders arising there from.

The Commissioner General (CG) has advanced several grounds to support his appeal, including the fact that the Tax Revenue Appeals Tribunal erred in law and facts in holding that the disputed tax was not lawfully assessed and demanded.

Tanga Cement Company Limited (Company) is a manufacturer and supplier of cement. Its factory is located in Tanga, while its headquarters is situated in Dar es Salaam. It sells most of its cement through its wholesale agent known as Cement Distributors East Africa Limited (CDEAL).

The Company had entered into an agreement with the agent under which it would grant it post-sale rebate of the price it paid per tonne of cement of the volume of sales at the end of each month, during which CDEAL would exceed the agreed minimum sales.

The rebate was set at 400/- per tonne or 200/- per bag of cement. It would be utilized not in cash, but through additional cement when the agent buys cement during the following month. In this way, CDEAL would benefit in the subsequent month from the additional cement bought in the previous month.

In its part, the TRA acknowledged and accepted the arrangement between the Company and its agent. Such arrangement was implemented during the income year 2007 and 2009.

However, on August 30, 2011, the CG issued a notice of assessment for additional Value Added Tax (VAT) for the subject year, demanding 808,571,869/40. His reason was that the rebates which the Company was giving to CDEAL were contrary to the VAT Act and Regulations.

He also maintained that under the VAT Act and Regulations, the rate of discount could only be shown on a tax invoice at the time of supply. The Company was aggrieved by the decision by CG and decided to take the matter to the Tax Revenue Appeals Board.

But, having gone through the records, the Board dismissed the appeal by the Company, observing, among others, that under the law, in case of a discount that results in a reduction of the value of supply, the taxable person issuing a tax invoice in respect of taxable supply was required to issue a credit note.

The Board expressed its expectations that the Company would have issued the credit notes at the time of supply, meaning that at the time it issued the tax invoices on the basis of which the rebates were granted. 

It was on such basis when the Company decided to file an appeal to the Tribunal to challenge the findings by the Board in question.
Source: Daily News, reported by Faustine Kapama from Dar es Salaam, Tanzania
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