Claiming input VAT on raw-material purchases
How a South African manufacturer records input VAT on raw-material bills, keeps valid tax invoices on file and takes the figures to its VAT201.
By Achekam · · 5 min read · For Manufacturing businesses in South Africa
For a South African manufacturer, input VAT on raw materials is usually the single biggest number on the VAT201 after output tax. Steel coil, resin, flour, timber, chemicals, packaging: every bill carries VAT that you can claim back, provided the supplier's document is in order and the claim is in the right period. Get it wrong and the cost is real. A claim on an invalid invoice can be disallowed on audit, and a valid claim missed is cash you have handed SARS for nothing.
The work is not complicated, but it has to be done the same way on every bill. This article covers how input VAT is captured in Achekam, what to keep on file, how duplicates are stopped, how to get the figures to your VAT201, and a monthly review that catches problems before SARS does.
Input VAT on each bill line
South Africa's standard VAT rate has been 15% since 1 April 2018; it was 14% before that. In Achekam, a South African business's supplier bills and purchase orders take 15% or 0% VAT per line, and posted bills put input VAT in the ledger.
Line-level VAT matters for a manufacturer because one supplier invoice can mix items. A distributor of food ingredients may supply some products at 0% and others at 15% on the same invoice. Capture each line at the rate the supplier's tax invoice shows, rather than applying one rate to the total.
Supplier bills are recorded line by line with VAT. Where a bill has no purchase order, it waits for someone to approve it before it posts, and approved bills can be paid in full or in parts from the bank account you choose. For raw materials bought on orders, the supplier invoice is matched first, and posting a matched invoice puts it in the ledger as expense, input VAT and trade payables.
Valid supplier tax invoices
Input VAT can only be as good as the document behind it. SARS's VAT 404 Guide for Vendors covers tax invoices and documentary proof, input tax limits, records and penalties, and it is the reference for exactly what a valid tax invoice must contain.
In daily practice, the person capturing a bill should check before posting:
- the document is a tax invoice, not a quote, statement, delivery note or pro forma;
- it is issued to your business, under your registered name;
- the supplier's VAT number is on it;
- the VAT shown agrees with the lines and the rate.
Anything that fails a check goes back to the supplier for a corrected tax invoice before the input VAT is claimed. Keep the original documents, paper or electronic, filed so that each posted bill can be traced to its tax invoice quickly. Imported raw materials are a separate case, with their own customs documents; agree with your accountant how those claims are supported.
Duplicate invoice numbers refused
Raw-material suppliers often send the same invoice more than once: with the delivery, by e-mail, and again with the statement. Claim it twice and you have overclaimed input VAT.
In Achekam, the supplier's invoice number stops a matched invoice being posted twice. That protection depends on the number being captured exactly as printed, so make it a rule: copy the supplier's invoice number character for character, including prefixes and leading zeros, and never add your own suffix to force a second posting through. If a supplier has genuinely issued a replacement invoice, ask for a credit note against the original first.
A raw-material bill, in words
A plastics manufacturer receives a resin delivery against a purchase order. The supplier's tax invoice arrives by e-mail the same day. The bookkeeper checks it is a tax invoice in the company's name with the supplier's VAT number, matches it to the order and the delivery, and posts it: the resin cost, input VAT at 15% and the amount owed to the supplier. A week later the supplier's statement arrives with a copy of the same invoice attached; when someone tries to post it again, the invoice number stops it.
Taking the figures to the VAT201
Here is the limit to plan around. Achekam does not prepare, store or submit a South African VAT201 return, and nothing is submitted to SARS eFiling. The VAT screen does not yet read a business's own VAT, and the books overview shows only a single output-less-input VAT figure from the ledger. An appointed accounting firm can see a client's monthly output and input VAT from the client's ledger and download it as CSV.
So the VAT201 is prepared from your ledger, by you or your accountant, and filed on eFiling. The general ledger lists every posted line, and the trial balance shows each account for a period or at a date, so the input VAT account for the VAT period gives you the total to declare, with every bill behind it. How to work through the return from your books is covered in preparing your VAT201 when your books are in Achekam.
Reviewing input VAT monthly
Do not leave input VAT to the week the return is due. A short monthly review catches most problems while suppliers can still fix them:
- Run the general ledger for the input VAT account for the month.
- Scan for unusually large amounts and for suppliers you do not recognise.
- Check a sample of postings against their tax invoices, including at least one from each major raw-material supplier.
- Look for bills captured at 0% that should carry VAT, and the reverse.
- List any bills still waiting for a corrected tax invoice, and chase them.
For the sales side of the same return, South African VAT on invoice lines explains how 15%, 0% and exempt lines are handled on your own invoices.
A practical start
Brief whoever captures bills on the four checks above, make "invoice number exactly as printed" a house rule, and put the monthly input VAT review on the close checklist. Before the next VAT201, reconcile the input VAT account for the period to the bills behind it.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
