On 10 February 2022, the Tax Appeal Tribunal (TAT or “the Tribunal”) sitting in Lagos, ruled in CHI Limited (CHI or “the Appellant”) and Federal Inland Revenue Service (FIRS or “the Respondent”) that stock-in-trade as provided in section 17 of the Value Added Tax (VAT) Act for the purpose of determining input VAT allowable as a deduction from output VAT is not limited to raw materials, but includes the input VAT incurred on purchase of natural gas and diesel, short term spares and other manufacturing consumables.
Background of the Case
In September 2020, CHI wrote to the Tax Policy and Advisory Department of the FIRS requesting for permission to recover the input VAT incurred on the purchase of natural gas and diesel, short-term spares and other manufacturing consumables used in the manufacturing of its products against the output VAT charged on the sale of the products. The FIRS rejected the request on the basis that the expenses under consideration were production overheads and, therefore, did not qualify as stock-in trade or raw materials for input VAT recovery purpose.
Dissatisfied with the FIRS’ position, the Appellant sent a subsequent letter urging the FIRS to reconsider its position, but this was also rejected. Following the impasse, CHI filed an Appeal before the TAT seeking the following reliefs:
- A declaration that the Respondent’s construction or interpretation of section 17 of the VAT Act is wrong in law.
- A declaration that the Respondent’s decision that the Appellant cannot claim input VAT incurred on natural gas, short term spares and other consumables used in the direct production of its products in line with section 17 of the VAT Act is wrong in law.
- A declaration that natural gas, short term spares and other consumable used by the Appellant in the production of its product constitute stock-in-trade.
