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Big boost for MSMEs

Published:Sunday | September 28, 2014 | 12:00 AM
Golding

Senate approves changes to GCT Act

Daraine Luton, Senior Staff Reporter

IN WHAT the Government calls a boost for the micro, small and medium-sized enterprise sector (MSME), business which records sale of less than $3 million will now be able to register under the General Consumption Tax Act.

"The status of being registered taxpayers allow the benefit of claiming input tax credit and refunds in certain cases as the registered taxpayer is allowed to pass a tax on to the final consumer," declared Justice Minister Senator Mark Golding.

The minister, in piloting the GCT (Amendment) Act through the Senate last Friday, said that with the change to the law, traders who do not meet the $3 million threshold will be able to register as a taxpayer under the GCT Act.

"This amendment will assist the MSME sector, which is so critical to economic growth and employment, as businesses whose sales do not come up to the registration threshold may elect to register and thereby will no longer have to absorb the cost of the GCT on their business expenses," said Golding.

net GCT surplus

He told legislators that persons who fall below the threshold can chose to register and will have to file returns and pay over net GCT surplus.

The amendments to the GCT Act have been made as part of Jamaica's commitment to tax reform with the International Monetary Fund. The changes, among other things, seek to improve the efficiency of the tax-collection system by requiring persons who have acquired a taxable activity through purchase, transfer or other disposition to provide the Commissioner General of Taxation documentary proof of acquisition.

The bill also imposes GCT on services provided to a person who is a resident in Jamaica by a non-resident or by a resident from a business carried on by a resident of Jamaica.

Golding, in piloting the bill through the Senate, said it would make Jamaican businesses more competitive internationally. He argued that several of the measures will be a benefit to the manufacturing sector, which included deferred payments on inputs. Manufacturers will also be able to claim a refund on some inputs, which if imported would have qualified for exempt customs duties.

"The bill, therefore, lightens the tax burden on these manufacturers and enhances their competitiveness," said Golding.

Meanwhile, under the new regime, goods and services purchased in Jamaica for use in free zones will no longer attract GCT. At present, free zones do not pay GCT on imported goods, but if the same goods are sourced domestically, GCT at the standard rate of 16.5 per cent is applied.

"The inescapable outcome of this anomaly is a significant disincentive for free zone operators sourcing supplies locally," said Golding.

The provision is being extended to hotels and resort cottages which elect to continue enjoying benefits under the Hotels Incentives Act. They will also benefit from zero GCT on local produce if the same produce imported does not attract the tax.