January was a busy time for companies and CFOs as every business was going through a change — the UAE was lining up for the VAT. Businesses were busy not only with the implementation, but getting familiar with the changes in accounting entries, processes, documentation, compliance, behaviour and many more.

The accounts teams were tasked with an action plan to ensure adequate accounting, invoicing, and stock recording were VAT-compliant. That there was adherence to document verification, and there was overall compliance to prove the authenticity of transaction within the VAT framework.

Whenever any new law comes, there are always questions about it and it takes some time for the consumers and businesses to get used to it. From time to time, FTA’s clarifications on designated zones, medical services and import of goods have helped the businesses in getting more clarity and understanding about VAT.

For some businesses, VAT compliance has been relaxed and the tax period is extended until May 31 for which the returns filing is to be done by June 28.

Customs documents are now linked to the Federal Tax Authority, and the information shared with any authority is accessible for all import transactions. It took some time for business to align their acts to ensure that documents are uploaded and linked for a seamless transaction processing during the import process.

The country’s shipping, customs clearance and logistics sectors have come a long way to ensure VAT compliance in their respective spaces and ensuring the flow of goods clearance. Much has been achieved, but there is still some way to reach the destination.

Retail stores worked effortlessly to ensure display prices are inclusive of VAT and billed items reflect sales and VAT separately. It’s a mammoth task, as all the price tags had to be replaced in a short span to ensure compliance.

The main challenges faced by consumers after VAT is the rise in prices and understanding the invoices given by vendors. Some unregistered vendors started charging VAT and some increased prices on grocery items.

Next comes the struggle of rounding — what amount can be rounded-off to ensure compliance. Let me talk to you about a tea vendor. When I go for a single cup of tea he charges me Dh1.25 (inclusive of VAT), whereas when I order five cups, the charge is Dh1.05 (inclusive of VAT) per cup.

I can understand why this is so, but not so sure if this is the case for everyone. These have led to minor arguments at the smaller retail shops. But increased awareness has effectively reduced the number of issues raised by the consumers.

Contractors are still struggling to negotiate on contracts entered into during 2017 or earlier, on the VAT to be charged. And whether the contract value should be inclusive. These discussions have become difficult where services are provided that are under the exempt category.

The debate is still on related to the money retained. However, the answer lies in the future course of action and the contracts that will be in place.

The Central Bank through its notice number 421/2017 informed banks operating in UAE to “absorb the applicable VAT until further instructions”. National and foreign banks and financial companies operating in the UAE worked effectively to align the systems in the short-run to comply with the notice.

Looking at the large base of clients, banks are working effortlessly to ensure compliance and ensure tax invoices are issued seamlessly to clients electronically. In the meantime, corporates and registered VAT entities are going to enjoy 5 per cent less cost on bank charges on account of the availability of input tax on bank charges.

A challenge businesses faced during the first month of VAT were mostly in getting and verifying the TRN numbers from customers and suppliers. The problem was solved to an extent after FTA launched an official website to verify the TRNs and a statement given regarding the TRN certificate requirements.

VAT has not made any visible impact as far as lifestyles of the people are concerned. Of course, they have become budget-conscious now. Still, many retailers are selling items at their old prices — and inclusive of VAT.

With the first VAT returns, the majority of businesses should be well-prepared with the data. And if anyone is facing issues, they can always write to FTA for clarification and help.

The writer is Chairman, ICAI Dubai Chapter.