[FAQ] Is the sale of borehole water a zero-rated supply?


Client “A” is a farmer who is a registered VAT vendor. His neighbour (Client “B”) is a poultry farmer (with a chicken abattoir) and buys borehole water from Client A. This water is transferred from the borehole of Client A to the water tank of Client B and undergoes no processing; it is natural water.


As water is a natural resource and the water does not go through any processing, is the sales of the borehole water a zero-rated supply?


The VAT Act

Section 7(1)(a) of the VAT Act imposes VAT on the supply of goods or services made by a vendor in the course or furtherance of the VAT enterprise carried on by the vendor. VAT is imposed at the standard rate of currently 15%, unless the supply qualifies to be supplied at the zero-rate in terms of section 11 of the VAT Act or are exempt from VAT in terms of section 12 of the VAT Act.

Goods” is defined in section 1(1) of the VAT Act as, amongst others, corporeal moveable things, fixed property and any real right in the property or things.

Section 11(1)(g) of the VAT Act zero-rates a supply where “the supply is of such goods used or consumed for agricultural, pastoral or other farming purposes as are set forth in Part A of Schedule 2”.

Part A of Schedule 2 to the VAT Act does not list water as goods that may be supplied at the zero-rate of VAT.

Application of the principles

Water constitutes goods for VAT purposes. The sale of water is accordingly subject to VAT. If it is sold to a local recipient, it is subject to VAT at the standard rate, whcih is currently 15%.

Webinar Commentary

Further webinar commentary on Introduction to VAT: Output Tax can be accessed here.

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