VAT Public Notice on Non-Exempt Items

The Federal Inland Revenue Service (FIRS) issued a Public Notice on Wednesday, June 24, 2020. The Public Notice seeks to provide clarification to Paragraph 2 of the Value Added Tax (VAT Modification) Order 2020 (Modification Order) made by the Minister of Finance, Budget and National Planning (Minister) on February 3, 2020. We provide below, our synopsis and remarks on the Public Notice here. You can also find the Modification Order here.


The Minister had through the Modification Order sought to provide clarification to the interpretation of Nigeria’s VAT Act. You may recall that the First Schedule to the VAT Act had been amended by the Finance Act 2019 earlier in January 2020. The amended First Schedule had provided additional list of VAT-exempt goods and services. The Modification Order accordingly sought to interpret some expressions used in the amended First Schedule as well as expand the list of VAT-exempt goods. In doing so, the Modification Order had mentioned the following items: (a) “natural gas”; (b) “essential raw materials for the production of pharmaceutical products; (c) “renewable energy equipment”; and (d) “raw materials for the production of baby diapers and sanitary towels”. We shall refer to them, altogether as, the Disputed Exempt Items.

FIRS’ Public Notice:

FIRS, via the Public Notice has indicated that the Disputed Exempt Items shall not be exempted from VAT on the basis that, they are neither listed in the First Schedule to the VAT Act nor contained in any previous Ministerial Order. The Public Notice had earlier stated that the import of the Modification Order is to provide guidance to importers, other stakeholders and the Nigerian Customs Service on the items to which VAT would not be charged at Nigeria’s ports; including the Disputed Exempt Items that were so listed.

Our Immediate Thoughts:

The relevant Section 38 of the VAT Act empowers the Minister to vary the Schedules to the VAT Act; in this case, to add or remove from the list of Exempt Items contained in the First Schedule to the VAT Act. This and more was what the Minister did with the Modification Order. The Public Notice has however sought to limit the application of the Modification Order on 2 fronts, to wit, by seeking to: (a) exclude the Disputed Exempt Items from the list of VAT-exempt items, even when the Modification Order has so exempted them; and (b) restrict the application of all the Items exempted under the Modification Order to VAT exemptions at Nigeria’s ports only, even where the Modification Order has not said so. In our view, the FIRS, whether through the Public Notice or its practice, has no power to vary or amend the Modification Order. Clearly, the Public Notice has brought more confusion to both the VAT administration of the Disputed Exempt Items and the application of the Modification Order as a whole.

While we are now engaging both the FIRS Headquarters and local FIRS offices for more clarity on what is indeed a confusing situation, please rest assured that we shall update you as we receive clarifications, whether from the FIRS or by other developments on the subject.  Meantime, please do not hesitate to reach out to us if you require clarification on the foregoing.

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