The F&B sectors includes a combination of goods and services which may fall under different tax rates depending on the nature of the items.

Purchase:

• Imports will attract VAT under the Reverse Charge Mechanism unless certain ingredients are zero-rated. Essential and staple food items are Zero rated.
• Outsourced manpower, which is quite common in this sector, will be subject to VAT but can be claimed as Input tax credit.

Sale:

• Supply of food items referred to in Article 31 of the unified GCC Agreement i.e, on food items mentioned in a list of Goods approved by the Financial and Economic Cooperation Committee will be zero-rated.
• Supply of food items other than the basic food items mentioned in article 31 of GCC agreement will be charged at standard rate i.e., 5%.
• Restaurant and catering services will charge at standard rate 5%.

The final impact of VAT on F&B as revealed by the government will be as follows:

Sector VAT News Update

Watch this space for updates

Sector impact analysis is provisional based on the GCC Draft and may change when the country issues the relevant VAT laws.